Debit Cards Overtake Checks in Payments Mix
More consumers are choosing debit cards instead of checks and other noncash payment options, according to a recent Federal Reserve payments study. The increase in debit card payments—from 25 billion in 2006 to nearly 38 billion in 2009—mirrors a wider trend as consumers increasingly shift toward electronic payment methods. Indeed, the study found that in 2009, more than 75 percent of the nearly 109 billion noncash payments were electronic, compared with about 65 percent in 2006.
In contrast, the number of checks written continued to decline. During the three years covered by the survey, checks processed fell from 32 percent of noncash payments to 22 percent. However, there is one category where checks are still the dominant noncash payment instrument—consumer-to-consumer payments. Here, the number of checks written grew from 2.2 billion to 2.4 billion during the three-year period covered by the study.
"The results of the study clearly underscore this nation's efforts to move toward a more efficient electronic clearing system for all types of retail payments," said Richard Oliver, executive vice president at the Atlanta Fed. Indeed, similar to the wider trend toward electronic payments, the number of checks processed electronically more than doubled between 2006 and 2009. According to the study, 96 percent of interbank checks—those deposited at one institution and drawn on another—involved electronic clearing in 2009.
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Federal Reserve Governor Elizabeth Duke made a similar observation during a speech in early December on consumer credit and payments. "This shift in credit to debit makes sense from the perspective of the consumers," she noted. "If credit is tight and consumption is contracting, consumers who are reluctant or unable to increase their credit levels can use debit cards to pay for current expenses out of current, rather than future, income."
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