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Today’s economy has had a large impact on the finances of millions of Americans. Spending is down and saving is higher than it has been in 14 years. Visa’s new report, in fact, shows that consumers are turning to their debit cards now more than ever.
Visa’s April 29 report shows that the total volume of transactions made with debit cards issued by Visa at the end of 2008 was higher than the amount spent on credit. This is the first time in their recorded history that debit purchases were higher than credit transactions, a clear indicator of consumer’s worries. Fourth quarter debit purchases made up a full 50% of Visa’s volume, while the same period of 2003 showed only 40% of purchases were debit.
This debit card growth is far higher than what analysts predicted. At Bancorp, a financial holding company, debit purchases rose over 2% in the first quarter from last year, while credit transactions decreased about 4%.
Mastercard has also said they’ve seen a shift toward debit purchases, citing a report showing debit card transactions rose a full 13% last year with credit purchases down 2%.
This switch from credit to debit shows the type of accounts across the country, reflecting concern about debt and personal finances. While savings rates are up 5% in January alone, credit card debt has decreased an amazing 9%.
Don’t expect this to last forever, though. Nilson Reports expects the debit purchases to eventually even out as credit and debit card spending slow over the next 5 years.