Consumer spending over the last three quarters of 2011 has shown a reversion to credit card use over debit card. Silvio Tavares, senior vice president at First Data, which processes card transactions for 4.1 million merchants, notes that “Consumers have spent the last couple of years de-leveraging and reducing credit card use, but the past month — and since April — they’ve been using their credit cards more and are starting to return to pre-recession buying.” The first quarter of 2011 saw an 8.2% increase in credit card use, followed by a 9% increase in the second quarter and a 10.6% increase in the third quarter. On the other hand, debit card use increased by 9.6%, 8.3%, and 5.9% in quarters one, two and three respectively. On black Friday alone, credit card use jumped 7.4% from the same day a year ago.
A major contributing factor to the rise in credit card use is that the banks are encouraging consumers to switch from debit to credit. Credit card use is more profitable and cost effective for banks compared to debit/checking accounts. To get consumers to make the switch, credit card mailings have increase 85% since early 2010, and many of these credit card offers come with new perks such as rewards points, miles, or cash rebates. The number of credit cards offering such perks has increased over the past two years from 6 out of 10 of the credit card offers in 2009 to 8 out of 10 credit card offers today.
Analysts believe that an increase in credit card offers will continue to intensify as debit cards become less cost-effective for banks. Banks have started to raise checking account fees and charge debit card usage fees, all of which is part of the attempt to get consumers to switch to credit cards. Although consumers will not be charged with the same usage fees on their credit cards, Bill Hardekopf, CEO of LowCards.com warns consumers to pay off their balance each month because the interest payments will be much greater than any new debit card fee.
Blake Ellis, Credit card use is on the rise, https://money.cnn.com/2011/12/05/pf/credit_card_use/index.htm?iid=SF_PF_LN (accessed 12/7/11)