Consumers have decreased their use of checks, private label credit cards, and cash according to Visa research presented in a Discussion paper from the Payment Cards Center at the Federal Reserve Bank of Philadelphia. Despite hints of 2014 data, the information presented was based on Visa’s 2012 financial diary research.
More recent findings from the Visa Payment Panel Study reveal declines in cash use – a return to the long-term trend – and increases in credit card use, perhaps signaling some return of confidence among consumers. Check use continued its unbroken long-term decline, and debit card growth has slowed. Private label cards have also registered a steady decline in their share of spending volume for a number of years.
While the return to credit may be a sign of consumer confidence, it is not clear that this is equally distributed among all groups. The study noted a drop in young people’s use of credit, in part because of the regulatory changes that make it more difficult for them to get credit cards. The study also suffers from a limitation in that it represents only about 85% of the U.S. population, excluding some segments in lower income brackets.
Two other things stand out about credit card use. First, 90% of the credit cards have rewards programs attached, while debit card rewards ended by most banks in the wake of the Durbin Amendment to the Dodd Frank Act. The other interesting stat is that the ownership rate of credit cards went from 81% in 2007 to 78% in 2012. This may be a reflection of broader demographic shifts in the market, where concentrations of income lead to more credit card spending by those who can afford it rather than a generalized improvement in consumer confidence. The 2014 data should shed further light on this.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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