Americans are increasingly reaching for debit cards over credit, a shift that reflects both economic pressures and cultural attitudes toward debt.
Two decades ago, credit cards accounted for more than two-thirds of card purchases in the U.S., with debit representing about one-third. Today, debit transactions account for nearly half of all card spending, and recent trends indicate that usage is on the rise again.
The shift is partly driven by younger consumers, especially Gen Z, who are far more likely to favor debit. Financial analysts say many young adults associate credit cards with financial risk, having come of age amid rising student loan balances and warnings about the dangers of credit card debt. Surveys show a quarter of Gen Zers want to avoid debt at all costs.
High interest rates have also made debit more appealing. While the average American pays more than \$1,600 a year in credit card interest, overdraft charges tied to debit average less than \$120. For those trying to manage household budgets, debit cards offer an immediate sense of spending limits that credit does not.
At the same time, fintech firms and traditional banks are rebranding debit cards as trendy and rewarding. Companies like Venmo, Cash App, and Chime have launched debit cards with cash-back programs and celebrity marketing campaigns. Even American Express has introduced debit options. Roughly 40% of debit card users now earn some kind of reward, a strategy that mirrors the credit card industry.
Economic incentives also matter for banks. Debit users tend to keep money parked in checking accounts, a benefit when interest rates are high. The rise of cashless stores and the growing use of digital wallets have further boosted debit’s appeal, particularly for online shopping and buy-now-pay-later services.
Source: Newsweek