For years, debit cards have been a primary payment method for U.S. consumers, offering convenient access to funds directly from checking accounts. However, recent survey data suggests that consumer preferences may be shifting. As credit card rewards programs become more attractive and digital banking tools continue to evolve, many households appear to be relying less on traditional debit card usage. This trend raises important questions about how consumers are paying, the role of digital channels in everyday transactions, and the broader impact on merchants and payment economics.
A survey report highlighted in USA Today surmises that consumers are leaving their debit cards behind in favor of credit cards and online banking.
Debit card use is declining in the U.S., according to new report from ValuePenguin. Since 2013, the percentage of households that use debit cards has dropped from 74 percent to 58 percent, in favor of alternative payment methods, such as credit cards and online/mobile banking. Almost a third more households pay with credit now compared to five years ago.
New Jersey, Connecticut and Hawaii are among the states that have seen the sharpest decreases in debit card usage. South Carolina and North Dakota have seen the least change: Only 4 percent of households there have stopped using debit.
It’s unclear what aspect of online/mobile banking is causing consumers to cut up their debit cards. If they are referencing payment apps that are often included in a financial institution’s digital product offering, I consider that is form factor for a debit or credit card, not a replacement.
The report does provide further commentary around the rich rewards available with credit cards that have enticed a lot of former debit card users. If this finding is correct, then that suggests that the premise of Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act which was to provide less expensive payment processing options for merchants has been un-done. If so many consumers have moved their payment habits to credit cards for the rewards, then merchants are now paying unregulated (or less regulated) interchange levels on the majority of their transactions.
The reported decline in debit card usage reflects the ongoing evolution of the payments landscape, where consumers increasingly prioritize convenience, rewards, and digital experiences. While online and mobile banking may influence payment behavior, much of the shift appears tied to the growing appeal of credit card rewards programs. If consumers continue migrating from debit to credit, merchants could face higher payment acceptance costs, potentially undermining some of the intended benefits of debit-focused regulatory reforms. As payment options expand, understanding the factors driving consumer choice will remain critical for financial institutions, merchants, and policymakers alike.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group