Debit Card Use

Debit card penetration slows, but purchases increase

NEW YORK (7/2/07)--Credit unions looking for ways to get their members to use their debit card will be interested in a new study, which concludes that the percentage of U.S. households employing debit cards is up dramatically; card penetration is slowing; and transactions are increasing.

TNS Group, a market-intelligence firm based in New York, conducted the study.
What do these findings mean for credit unions? It means that with penetration slowing, financial institutions will be challenged even more to find new ways to get the cards into members' hands (ATM & Debit News June 28).

Among the findings:

• Sixty-three percent of U.S. households in 2006 had at least one debit card--up from 52% in 2002, 49% in 2001, and 36% in 1998. By 2009, the number of households with debit cards is expected to reach 73%, says George Ravich, senior vice president and general manager of syndicated research at TNS. Ravich told the publication debit card penetration is still increasing but at a slower rate.
• Households use their debit cards to pay for 13.3 transactions per month, versus paying for 6.6 transactions a month with credit cards. Merchant acceptance of debit cards is contributing to the increase, said the publication.
• The growth rate of debit transactions is expected to remain at 15% annually for several years.
• Debit card users are shifting toward more expensive purchases. At one time the breakpoint for a debit card purchase was $50.
• Debit card transactions are also increasing for smaller purchases because major card companies no longer require card users to sign a receipt for purchases of less than $25. Debit cards are paying for more meals, with debit card transactions at quick-service restaurants for first quarter growing 32% over the previous year.

To deepen debit card use by members, financial institutions will need effective strategies aligned with the issuer's acquisition, including cross-selling, retention and payments strategies, Ravich said.

Also, they must place more importance on developing debit card innovations and differentiating them from other commoditized products such as free checking. They can link the cards to deposit accounts, online banking and bill payment to drive use from a source other than point-of-sale transactions, he said.

courtesy of cuna.org