Consumers are holding more debit cards due to bank mergers and closures, and a more careful approach to household budgeting following the recession.
The percentage of consumers holding multiple debit cards grew to 37% in the second quarter, up from 28% to 30% during the previous three quarters, according to Auriemma Consulting Group, which surveys about 500 consumers online for its quarterly research. It conducted the second-quarter survey in April.
"While this distribution could still change in future reports, it may also suggest that consumers are less likely today to put all of their money in a single financial institution, hence many have more debit cards than they did last year," the report says.
Bank closures tend to encourage more financial diversification. There may also simply be a greater prevalence of debit cards, according to the report.
Virtually all of the respondents, 97%, said they had a debit card that can be used to initiate purchases. The 3% who said they did not have any debit cards was down from 5% to 6% who said so during similar surveys conducted in previous quarters, the report notes.
The data illustrate how debit cards have "become, in effect, standard issue," Scott Strumello, an associate at Auriemma, tells PaymentsSource. "These days, consumers have an expectation they will be issued to them; 10 years ago, the same couldn't be said."
Some 38% of respondents said they had a debit card usable only to get cash from ATMs, up from 34% who did in the first quarter. This, too, could be a sign of how consumers changed their habits during the recession.
"When given the choice between an ATM-only card and a debit card, some consumers, having experienced economic turmoil, are opting to select the ATM-only card as a means to control spending," he says. "The reason debit cards are so popular is that consumers see them as a means to prevent spending money they don't have."
The slight increase in consumers saying they have ATM-only cards ties in somewhat to the growth in consumers who say they have more debit cards. Some may be using ATM-only cards for different purposes and types of accounts, Strumello says.
The percentage of respondents who said they used their debit cards to get cash from ATMs declined significantly, to 10% from 17% in the first quarter. This suggests consumers are getting cash back at the point of sale to save money, Strumello says.
"Partly it is in response to additional fees levied by banks, and it's related to a pattern of behavior where consumers are multitasking with their debit cards," he says.
Respondents also used their debit cards more frequently in April–an average of 18.1 times per month compared with 14.9 times during the first quarter (see chart). And respondents said they spent an average of $467 per month using their main debit card, up slightly from $454 on average during the first quarter.
Both increases likely were seasonal, Strumello says.
Credit and debit card sales volumes have been crisscrossing over the past 17 months, but without an obvious explanation. In January last year, credit card sales surpassed that of combined PIN and signature debit, and in February this year, debit retook the lead and continues to grow in share of overall card payments, data from First Data Advisors show (
First Data plans to release follow-up analyses this month to explain the changes in consumers' card-spending patterns, a spokesperson tells PaymentsSource.
The percentage of respondents who favored using their debit card held steady at 57%, but 29% cited credit cards as their preferred payment method, up from 19% during the first quarter, "perhaps motivated by bank incentives promoting the use of credit," the Auriemma report noted.
The percentage of respondents who said their debit card was tied to a rewards program rose to 31%, from 24% the previous quarter. But the percentage of respondents who said their card was tied to a merchant-funded rewards program dropped to 5% from 7% in the first quarter.
From roundtable discussions, Auriemma has found that some issuers still may offer debit rewards but may discontinue them when the card-reissuance cycle comes up or contracts with third parties expire, Strumello says.
"They've already invested in the programs, and they may want to see if the economics work," he says. "They may also have an objective behind the rewards, such as reducing check use."
Cash-back debit rewards became the most common, cited by 44% of respondents, up from 39% in the first quarter and 34% the previous quarter. They overcame point-based rewards, cited by 43% in both quarters so far this year.
Points-based programs may need a third-party provider involved, which increases cost, so more issuers may have moved to a cash-back format, which is easier to manage, Strumello says.
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