The current recession has dampened credit card usage, but has been a boon to debit cards. Based on current growth rates for credit cards and debit cards in 2008, debit cards will likely overtake credit cards as the preferred way to pay in the USA by 2012. According to CardData, since 2004, purchases made on Visa and MasterCard credit cards has increased from $1 trillion to $1.4 trillion, or 40%. Purchases made on Visa and MasterCard debit cards has jumped from $500 billion to $1.1 trillion or 120%. In the last three months of 2008 when the recession became a “great recession” the amount of purchases made on credit cards went down 8% while purchases on debit cards rose 6%. Credit cards have fallen out of favor as consumers struggle with heavy debt and are frustrated with higher fees and interest rates and lower credit limits, according to cardtrak.com. While debit card usage continues to grow, prepaid cards have also experienced solid growth, according to Cardweb.com. There are also indications that cash is regaining some luster.
U.S. CARD PURCHASES (Visa and MasterCard) Credit Cards Debit Cards 2004: 1.0 trillion 0.5 trillion 2005: 1.2 trillion 0.7 trillion 2006: 1.3 trillion 0.8 trillion 2007: 1.4 trillion 1.0 trillion 2008: 1.4 trillion 1.1 trillion Source: cardtrak.com/CardWeb.com