How Americans Use Their Debit Cards

NEW YORK (MainStreet) —Last September, a study conducted by Javelin Strategy and Research found that, for the first time ever, debit card spending eclipsed how much people were charging on their credit cards.

At the time, this shift in our plastic preferences, while admittedly problematic for credit card issuers, didn’t seem to bear any particular meaning for consumers other than the avoidance of more debt.  If anything, the implication that Americans were getting more responsible about how they spent their money seemed like good news.

But then the Dodd-Frank Wall Street Reform and Consumer Protection Act gave the Federal Reserve the right to impose limits on interchange fees charged every time debit cards are used, and banks, fearing a serious cut in revenue, threatened to change their policies on debit card use.

Among the more seemingly egregious threats was the rumor that several major banks, including Bank of America, Citigroup and JPMorgan Chase were looking into capping individual debit card purchases at $100. Experts now speculate that these limits, if imposed, could cause a resurgence in checks, cash or credit card use as consumers are forced to use alternate forms of payment for larger purchases. 

But would caps – or other residual changes in debit card policies – really force consumers to change their current spending habits? To find out, budgeting site provided data to MainStreet on how its user base of 5 million people actually used their debit cards in 2010.

The numbers confirm that while debit cards are, in fact, our current payment method of choice (based on number of transactions and overall amount Mint users spent each month), their usage is already concentrated on small purchases. According to the stats, only 12.98% of all debit card transactions by Mint users in 2010 totaled more than $100 and only 8.13% of debit card transactions were more than $150.

On the other hand, a cap lower than that would be potentially problematic since the average debit card transaction amount in 2010 was $71, an amount well above the $50 limit also reportedly in consideration.

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