As checks and cash gradually give way to card-based consumer payments, supermarkets, gas stations, and department stores are emerging as testing grounds for the coexistence of credit and debit.

In the perfect world that would satisfy all interests, credit and debit cards would grow to complement each other. Debit cards would be used for small-dollar transactions customarily paid with cash, and credit cards would handle purchases of more than, say, $30.

But competition could just as easily arise. With the two payment options converging in many merchant locations, consumers may begin favoring one type of payment over the other.

While some organizations, such as the card associations, can benefit from the success of either payment option, others, such as credit processors and regional electronic banking networks, have a vested interest in seeing one or the other dominate.

Many people in the point of sale industry are watching the emerging merchant battlegrounds for clues as to how the payment options will play out.

"I think that debit can replace cash and checks," said Dale Dooley, president of ITS Inc.. which is based in Johnston, Iowa, and operates the Shazam payment network.

But debit cards "also can eat into transactions from the upscale type of users who until now have been using the credit card as a convenience card and then writing one check at the end of the month," Mr. Dooley said.

In department stores and gas stations - where credit has a strong beachhead - such a scenario has already begun to unfold.

Payment Systems Inc., a research firm based in Tampa, Fla., has found that as debit cards are more widely accepted, they displace a significant portion of credit card usage.

PSI data show that 29% of the dollars from debit transactions at gas stations and 30% at department stores in 1993 were previously handled by some type of credit card.

Though cash and checks were more profoundly affected by the advent of the debit card at these retailers, experts said the credit card dollar displacement was nonetheless noteworthy.

Whether debit will continue to progress at credit's expense at these merchants-is still an open question, observers said.

Some observers believe the ratio of credit to debit transactions will soon level off at gas stations and department stores, even as both payment options become more popular.

The way debit will affect credit "is going to vary by merchant category, and it's going to depend in large part on the consumer's preference in a given situation," said Peter Dunn, partner at Edgar, Dunn and Co., a management consultant based in San Francisco.

"But in the future, I do see [debit and credit] peacefully coexisting."

Though this may prove true in the long run, there are indications that more erosion of credit may be on the way at both department stores and gas stations.

At department stores, where purchases frequently exceed $100, consumers are expected to favor credit, which allows them to delay payment for a month or more.

However, the operators of debit networks clearly feel that some segment of the population will embrace debit for large-dollar transactions. This optimism is demonstrated most clearly by the recent agreement between Maestro, MasterCard's on-line debit unit, and Ikea, the Swedish furniture retailer.

Meanwhile, at gas stations, debit is beginning to explode, as a result of the dozens of recent acceptance deals between major oil companies and regional and national payment networks.

If department stores and gas stations are important indicators of how debit fares when entering an environment in which credit is established, supermarkets are seen as the laboratory for observing credit and debit programs when introduced more concurrently.

Supermarkets are a new frontier for all types of cards.

According to the Food Marketing Institute, the Washington-based supermarket trade association, 85.7% of supermarket purchases are cash or check.

By contrast, only 2.9% of supermarket dollars come from debit cards, and only 5.2% from credit cards.

The fact that U.S. supermarkets rang up sales of almost $300 billion in 1993, according to Progressive Grocer magazine, leaves little doubt as to why credit and debit providers alike have their eyes on the industry.

But it remains in doubt which payment option consumers will favor. While supermarket check-out amounts range from a few dollars to hundreds, the model in which credit cards take the large dollar transactions and debit takes the low does not seem to apply.

According to data from the food marketing group, the average value of on-line debit, off-line debit, and credit transactions all fall between $31 and $36.

"The marketplace is going to determine what the mix is," said Clark Crowdus, a vice president of point of sale consumer marketing at MasterCard International.

With nearly every consumer visiting a supermarket at least once a month, experts said consumer usage habits established at supermarkets may affect the growth of credit and debit in other areas of retailing.

With debit transaction volume expected to grow at 35% per year, answers to the questions about how credit and debit will affect one another may be only a few years away.

Until firmer numbers are available, though, many processors and networks are taking the same tack as ITS's Mr. Dooley:

"We're watching the market very closely, and we're trying to position ourselves to go with the flow."

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