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Published: Friday, 9/10/2010

Debit-card volumes top credit for 1st time


NEW YORK - Americans are shunning their credit cards and using debit to avoid incurring more debt, said Javelin Strategy & Research.

Total payment volume for debit cards surpassed credit-card volume for the first time in 2009 and will continue to eclipse it in 2010, according to a report released this week by the Pleasanton, Calif., market-research firm that specializes in financial services.

At Visa Inc., the world's biggest payments network, the total payment volume for debit cards increased by 7.9 percent in 2009 to $883 billion as credit-card volume declined by 7.3 percent to $764 billion.

Volume for debit cards at No. 2 MasterCard Inc. in Purchase, N,Y., rose by 5.8 percent and 2.8 percent at No. 4 based Discover Financial Services.

"Consumers are turning from one form of plastic to another," said James Van Dyke, president and founder of Javelin. "Credit cards are falling out of favor as cardholders become more cautious and look for more conservative payment methods."

Fifty-six percent of consumers said they had used a credit card in the past month compared with 87 percent who said they had in 2007, according to the study. If the rate of decline continues, 45 percent of consumers will reach for a credit card in 2010, the study said.

Consumers are spending moderately and focusing on paying down debt, resulting in decreased credit-card use, Mr. Van Dyke said.

Another cause for reduced credit-card use is financial reform aimed at protecting consumers, which has decreased the new cards given and cut spending limits, the Javelin report said.

Younger people also favor debit over credit because of the immediate nature of making a payment, which means the shift to debit will be long-term, Mr. Van Dyke said.

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