Debit Charges Pass Credit As Most Popular Form Of Payment

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WASHINGTON – Debit transactions have risen dramatically in recent years to exceed both credit and checks as the most popular form of payments, the Federal Reserve reported yesterday, providing an important backdrop to impending regulations on card interchange.

The Fed report, which shows that electronic payments make up more than 75% of all transactions in the U.S., found that check usage continues to decline, but also that credit card transactions fell slightly between 2006 and 2009.

For 2009 there were 84.5 billion electronic transactions worth $40.7 trillion, compared to 24.4 billion check transactions worth $31.6 trillion, the Fed said. Electronic payments include debit cards, automated clearinghouse payments, credit cards and prepaid cards.

Electronic payments “now collectively exceed three-quarters of all noncash payments while payments by check are now less than one-quarter,” the central bank reported. In the Fed’s prior study on the 2003-2006 period, roughly two-thirds of payments were made electronically in 2006.

Check payments declined the most in the latest study, by 7.2%; while credit card usage also declined, by 0.2%, and were eclipsed by debit cards as the most used noncash instrument, the Fed said. Debit cards surged by 14.8% to 37.9 billion payments totaling $1.5 trillion.

“The results of the study clearly underscore this nation’s efforts to move toward a more efficient electronic clearing system for all types of retail payments,” said Richard Oliver, vice president of the Federal Reserve Bank of Atlanta, which sponsored the study. “It is also likely that the results reflect changing consumer behavior during difficult economic times.”

Checks have moved dramatically into the electronic age. The Fed estimates that some 96% of checks paid are now cleared electronically, mostly because of image exchange. That’s up from an estimated 43% in only three years.


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