The ongoing race between credit and debit card issuers to claim the title for the most transactions carried out on their payment cards continues. In past years, credit and debit often flip-flopped in a close race.
With an unstable economy plagued by inflation, interest rates, and now tariffs, it turns out that credit has dominated U.S. consumer spending.
According to the Federal Reserve’s recently published Survey and Diary of Consumer Payment Choice, here are three factoids for you to know.
1. For 2024, the Survey and Diary of Consumer Payment Choice found that the share of transactions made with cash continued to decline. U.S. cash payments now account for only 14%, down from 16%.
2. Consumers continued to move away from paper methods. Significantly fewer consumers reported using cash and paper checks in the past 30 days. Only 36% of consumers used checks in 2024, down from 40% in 2023.
3. Of the two-thirds of payments made by consumers, credit cards accounted for 35%, and debit cards only accounted for 30%. The last time debit outpaced credit was in 2021, when debit held a 29% rate and credit held 28%.
What’s the Big Deal About Credit Being More Active than Debit?
It’s more than just the bravado of saying my card product is bigger than yours. There are two essential readings from this metric.
First, it illustrates that household budgets continue to deal with liquidity issues. As debt continues to grow and revolving credit reaches a historic high, people are increasingly relying on their credit cards to offset budget shortages. That is good news in the short term for lenders, as it generates incremental revenue. And through the wonders of accrual accounting, revenue continues until the account is charged off. In short, it is a front-end gain that kicks off back-end credit risk.
Next, it says that debit rewards continue to be limited. There are instances where issuers are attempting to revive debit rewards, which were previously shut down after Dodd-Frank reduced interchange fees. Credit card rewards typically yield a return of about 1%-2% at most issuers. If you do it right and select the best-in-class reward cards, such as the American Express Blue Preferred card, you will earn 6%, or my personal favorite, the Chase Amazon Visa, which fills all your needs at the world’s favorite e-commerce solution.
And for the consumer, sure it is best to extinguish your everyday expenses, but it will not help you build your cherished FICO score, like a good, up-to-date credit card payment.
What to Expect in 2026?
I’ve witnessed numerous business cycles over the many decades I’ve spent in credit. I say it’s going to get ugly very soon. Ugly means charge-offs will surge, credit will tighten, and collection queueswill swell to the point that card issuers will need more sophisticated strategies.
You can read about it in Javelin’s recent reports: Seven Credit Card Warning Signs in 2025: Don’t Stop Lending, but Watch Out | Javelin and Riffing on Tariffs: Now is the Time to Build Your Small Business Card Portfolio | Javelin.
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