(July 31, 2008) U.S. credit card transaction and dollar-volume growth once again played second fiddle to debit, according to the latest financial reports from MasterCard Inc. and Visa Inc. And U.S. debit and still-strong international growth kept the networks’ operating earnings in the black during their quarters ended June 30, although a one-time charge for its recent settlement with American Express Co. caused MasterCard to report a $747 million loss.

Credit cards in the U.S. are suffering from the weakening economy and a long-term shift in consumer preferences toward debit for smaller purchases. MasterCard’s U.S. debit- purchase transactions, excluding the PIN-based Maestro brand, rose 17.8% to 1.9 billion in the quarter from 1.61 billion in the year-earlier period. Over the same period, U.S. debit purchase volume rose 18.6% to $79 billion from $67 billion. In contrast, U.S. credit and charge card purchase transactions rose only 0.8% to 1.59 billion, and credit/charge purchase volume increased just 2.8% to $142 billion.

“In the U.S. we’re still seeing consumer spending patterns shifting to more non-discretionary purchases,” Martina Hund-Mejean, MasterCard chief financial officer, said in a conference call with analysts on Thursday. She noted that data from MasterCard’s network as well as its MasterCard Advisors unit indicate more purchases of necessary items such as food, gasoline, and medical care. “Consumers are finding it increasingly difficult to obtain credit as financial institutions tighten their criteria for loans and credit extension,” she said.

In all, MasterCard’s U.S. credit and debit purchase transactions rose 9.4% from the corresponding year-earlier quarter to 3.49 billion. Worldwide, MasterCard’s network processed 5.22 billion transactions on MasterCard, Maestro, and Cirrus cards, up 13.6%.

U.S. credit didn’t fare as badly at Visa, yet growth still fell far short of debit. Visa late Wednesday reported results for its third fiscal 2008 quarter ended June 30, although operating statistics in the report trail the financials by one quarter. Thus, in the second fiscal quarter ended March 31, U.S. debit payment transactions rose 15.8% to 4.91 billion from 4.24 billion in the year-earlier quarter. Debit purchase volume, including that on Visa’s Interlink PIN-based network, hit $193 billion, up 16.3% from $166 billion in fiscal 2007’s second quarter. On the credit side, U.S. payment transactions posted a 7.2% increase to 2.17 billion from the year-earlier quarter’s 2.02 billion, while payment volume rose 8.1% to $195 billion from $181 billion.

Worldwide Visa Inc. total payments volume grew 19.1% to $652 billion in the second fiscal quarter on a nominal U.S. dollar basis. Total payment transactions increased 15% to 10.7 billion. The figures do not include the bank-owned Visa Europe region, which is a franchise of publicly traded Visa Inc.

Both MasterCard and Visa generate most of their revenues from various network fees and assessments charged to members. Excluding a $1 billion after-tax charge to settle the antitrust lawsuit AmEx brought against MasterCard for its now-discontinued policy of preventing members from issuing AmEx-branded cards, MasterCard said it would have posted net income of $276 million in the second quarter. Net revenues, partially boosted by currency fluctuations, rose 25% to $1.2 billion.

Visa reported net income of $422 million for the quarter ended June 30, up 41% on a pro-forma basis from $299 million in the year-earlier period. Operating revenues totaled $749 million, up 13% from $661 million.