Pay now or pay later? In a bad economy, more consumers are choosing to feel the effects of their spending right away.

• In a significant shift in credit-happy American spending habits, people are beginning to use their debit cards more than their credit cards to pay for purchases.
• The recession has most consumers trying to curb their spending, which the immediate monetary loss of a debit card transaction can make easier. People are also shopping less for the big-ticket items that are usually paid for with credit, but they continue to use debit for everyday purchases such as groceries.
• The drop in credit card transactions may also have something to do with recent legislation, which had the effect of credit card companies lowering limits and raising fees – and making themselves less attractive to the struggling shopper.

Facts & Figures

• According to the Federal Reserve, total revolving credit went down $6.1 billion in July.
• Both Visa and Mastercard saw debit card transactions increase and credit transactions decrease in the first part of 2009.
• In the past 15 years, debit card transactions have grown to represent more than 50% of all non-cash transactions.

Best Quote

“People are managing their money in a different way. You clearly have a situation where those people who have jobs are exhibiting recession anxiety and they are making more debit transactions.” – David Robertson, the Nilson Report (which tracks credit card industry)