Beppie K / Flickr
Credit card use is decreasing, while debit card use is on the rise. The culprit may be the hard economic times, but that is not the only factor.
“People are being extraordinarily cautious because of concerns about a double-dip recession, and jobs not being returned,” says a recent USA Today story. “Consumers are opting for debit cards, because they’re ‘one of those mechanisms that allows you to spend what you have.'”
A Federal Reserve Board report states that credit card borrowing fell at a 6.3% annual rate in July and that the last time borrowing with credit cards increased was in August 2008.
I am not surprised by the report and survey’s findings. I put my credit card away about four months months ago and started using only my debit card or cash for purchases. Credit card debt scared me into switching. When I first got my credit card during my freshman year in college, I remember my father sitting down with me to talk about using credit responsibility. I managed to follow his advice of paying of the balance in full when I was employed, but that quickly changed when I stopped working to focus on school. I no longer use my credit card to feed my caffeine addiction. My credit card will only get swiped in case of an emergency and low funds.
I also remember getting credit as easy as as getting a library card. I applied and received my $500-limit credit card without a co-signer. Now, under a specification in the credit card reform bill, most college students can’t get a credit card without a co-signer. As for those with credit cards, lenders are reducing their risk by slashing consumers’ credit limit.
My credit limit has since increased, but using my debit allows me to interact with my money more responsibly. What I like about using my debit card is that I have access to up-to-date information. I can see the dollar amount decreasing instantaneously with a tap of my bank’s mobile app. If I’m not sure whether I have enough money to make a purchase, I can easily check it. Best of all, I can track all my purchases, making it easy to create a budget and stick to it.
Apparently, I am part of a generational shift, as the USA Today reporter calls it, that has many young consumers using debit over credit for similar reasons. Unlike my credit card, my debit card does not have any rewards or incentives, but according to the USA Today story, many businesses are offering customers incentives to pay with cash or debit. My incentive is not having to pay outrageous interest on purchases and avoiding credit card debt.
How has the bad economy changed your credit card use?
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price. 
I cut up my debit card a couple of years ago. I do not want the risk of someone getting my number and emptying my joint back account. A credit card paid off at the end of the month is convenient. However, I use cash to pay for many things. Interestingly, my hair stylist asked me to pay with cash when I can. This was a request from corporate. The rationale being that they don’t have to pay the credit card company when I use cash. I use cash at the gas station. I pay for groceries with my credit card which I pay off at the end of the month. I can easily keep track of purchases by credit, too.
Used Debit Card at Black Angus. Billed for wrong table. Unable to get a refund to our account for the past five days. Won’t be using Debit Card at a restaurant again soon.
@Patricia Miller Could it be that it’s not your banks fault? Because I had a similar thing happen to me when I was charged twice for a ticket I bought online and my bank took care of it, but did charge me about $2.50 for the trouble. Well, at least I thought it was them until I called and found out it was the ticket company who had charged me.
Debit cards are almost as dangerous as credit cards. If you don’t keep track of your usage you could easily wipe out your savings/checking account. Having to dole out the green stuff makes me think twice since it is no longer in my wallet. Swiping plastic does not give the same impression…mentally it’s more like the credit card…will pay later.
Credit cards were cool, but then the recession hit and now people are a lot more cautious. I think with debt, it makes your spending more “real”. It comes immediately out of your checking and your tangible cash is therefore gone. Credit is more for splurges now, and some people’s credit limits have been cut
Unless I know I can pay them off in full every month, my credit cards are off”limits.”
Sure I’ll get major offers from them begging me to use them and the same from new card issuers, but unless they are willing to lower their interest rates, I ignore all of them.
Even balance transfers cost anywhere from 3-4 percent of your balance, a few hundred for a 0 percent for a year deal.
And I still feel bad for the consumer who gets roped in at department stores to “save 10 percent by opening a card today.”
Don’t do it!