"The No. 1 reason consumers are using debit
cards is convenience," says Nancy Krattli, vice president of consumer debit
products at Visa. "They provide convenient money management -- you don't
have to carry cash, have exact change and there is no record-keeping because it's
on the bank statement."
She says Visa's cardholder surveys
indicate that people choose debit for day-to-day transactions such as gas, groceries
and drugstore purchases. But increasingly they're using them for smaller-ticket
transactions such as fast food, coffee at Starbucks, even parking. "The average
ticket has gone down," Krattli notes. "In 2004 the median was $24 and
it has come down to $22 now."
A Visa survey from August
2006 showed that 55 percent of check card holders use their check cards for purchases
less than $25, and 86 percent cited convenience as their primary reason.
rise of Gen P
The same survey showed that Generation P (for "Plastic,"
users 18 to 25 years of age) are driving check-card usage, with 60 percent reporting
they use check cards for purchases from digital content and vending machines to
parking and newspapers.
In a 2006 presentation to the Philadelphia
Federal Reserve, Ronald Congemi, head of First Data, a company that processes
credit and debit card transactions, said that check card use now "cuts across
all age and income demographics."
Krattli concurs: "The
heaviest user skews female, but Generation P is aggressively using it. And seniors
are embracing it, too."
rewards on the rise
Another driver in the use of check cards is reward
research showed that of the 97 banks that offer debit cards, 47 have reward
"Fourteen of Visa's top 15 issuers have reward
cards," says Krattli. "People like to be rewarded for what they do every
"Debit is replacing cash and checks,"
says Krattli. "With cash, you have no features or benefits. With checks,
people like to be able to write down the transaction, but it has no benefits.
People expect to be rewarded from credit cards and it has migrated to debit, too."
not as robust as reward programs on credit cards, check card reward programs are
still a good thing for those who use debit as an alternative to credit cards,
cash or checks.
For example, the Citi ThankYou program awards
one point for every $3 using a PIN and one point for every $2 spent for a signature
transaction. The ThankYou program with the Citi Diamond Preferred Rewards Card
gives five points for every dollar spent at grocery stores, gas stations and drugstores,
and one point per dollar at every other type of retailer, including online and
Comerica Bank's World Perks travel rewards
program has two tiers: For a $20 annual fee, cardholders earn one mile for every
$2 spent, and for $55 annually, they earn one mile per dollar spent.
The variety of rewards is also broad. Washington Mutual's free
checking account gives 3 cents on every purchase up to $250 per year. It also
offers "WaMoola for Schools," which earns a point per purchase for the
designated school. Points are converted to cash once a year and donated to the
Chase has three types of check card awards. Debiters
can earn miles with a Continental Airlines Banking Card (two tiers: $25 annual
fee equals one mile for every $2 spent; $65 annual fee brings one mile per dollar)
or a United Mileage Plus Check Card ($25 annual fee, one mile per $2 spent). Or
they can sign up for free for Chase Visa Extras, which gives one point for every
dollar spent on qualifying purchases.