US credit card use growth rate overtaking debit

US credit card use appears to be growing faster than debit card use, according to a new Federal Reserve Bank of Philadelphia report.

The report shows between 2007 and 2012, credit cards’ share of payments increased 5% at gas stations and grocery stores, and 2% at discount stores. “The larger share gains by credit cards during that five-year period suggest that they have recently displaced some cash and check use,” the report says.

Consumer Use of Debit and Credit Cards

The growing popularity of credit cards can be attributed to the availability of credit card rewards, larger credit lines, and the reduction of debit card rewards. Debit card rewards had been very popular until the Durbin Amendment to the Dodd-Frank Act, which limited debit card interchange for issuers with more than $10 billion assets by imposing an interchange cap of about 23 cents for each transaction.

“With per-transaction revenues to issuers subject to Regulation II [those banks with $10 billion or more in assets] cut nearly in half, providing cash back or other incentives to cardholders to encourage increased use of electronic debit payments was no longer economically sustainable for these issuers,” the Philadelphia Fed notes.

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