GoCardless, a firm that describes itself as a global fintech for account-to-account payments, published a report regarding consumers’ current and intended use of credit card and debit cards. In 2020, with an uncertain future, many consumers in the U.S. shifted their payment habits to prefer debit as they became increasingly concerned about their ability to pay for credit card interest. The results of GoCardless’ study, which includes results of a survey they conducted, suggest that a majority of consumers plan to continue that practice.
While some purchases, like purchases for vacations and travel, will likely be made on credit cards, the survey finds that overall, debit will be favored, at least in the near term. Below is an interesting finding that shows the preference for debit and credit plus Buy Now Pay Later payment plans broken out by age group:
Age: 18-25 25-40 57+ All
Would like to decrease use of credit cards: 84% 84% 63% 76%
Would rather use debit than credit cards: 89% 87% 54% 78%
Would rather use no-interest installment
payment providers (e.g., Klarna or Affirm)
over credit cards: 87% 87% 43% 70%
The firm had this to say about the results:
A majority of Americans (63%) say they are less likely to use credit cards for purchases now than before the pandemic. This number is significantly higher among Gen Z and Millennials, rising to 76% among 18-24-year-olds and 74% among 25-40-year-olds.
Of those using their credit cards less due to the pandemic, most are doing so out of financial concerns. Reasons include:
-Wary of getting into debt (46%)
-Fear of not being able to pay off the balance each month (27%)
-Concerns about managing the minimum payment (26%)
“The pandemic put people in tough positions financially, and that likely accelerated the move away from credit cards. But this is part of a larger trend, particularly among young Americans,” said Hiroki Takeuchi, co-founder and CEO of GoCardless. “Alternative payment methods such as Buy Now Pay Later are booming, and Americans are also discovering the benefits of account-to-account payments such as ACH debit, which have been popular in other parts of the world for years. Though they’ve dominated in the U.S. for decades, it’s clear that a seismic shift has started, and credit cards will be obsolete in a generation or two.”
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group