A New Study Documents a Breakthrough Year for Debit Cards

Debit cards were hot in 2003, and research released this week shows just how hot. A study conducted by Boston-based Dove Consulting says the number of consumers using debit cards tied to personal identification numbers to make purchases in stores rose in 2003 to 57%, up from 48% in a 1999 survey. At the same time, the percentage of customers using a signature to secure their debit transactions increased from 42% to 54%. The survey also showed a slight preference among cardholders for PIN debit, with 19% saying they use their cards only with a PIN. Fourteen percent were exclusive signature users, and a near majority, 49%, said they use both security methods at the point of sale. This result mirrors the results issued three weeks ago by Dove, which were drawn from the same study, in which slightly more consumers said they preferred to enter a PIN than said they preferred using a signature (Digital Transactions News, Dec. 16, 2003). The survey also cast light on debit card promotions and fees. Fewer than 10% of consumers surveyed said they receive rewards such as cash rebates or travel perks from their banks for using debit cards, even though many issuers have begun to offer debit card rewards programs similar to those they offer on credit cards. Among those who said they received rewards, 44% said they earned them regardless of whether they signed a receipt or entered a PIN, while 46% said the rewards were tied only to signature debit. At the same time, Dove said the survey indicated persistent confusion among consumers about the cost of using debit cards. Fourteen percent of respondents said they pay a fee for PIN debit transactions?and 7% said they were charged for signature-debit transactions?although most banks don't charge per-transaction fees for either type of debit, and among those that do assess a charge, most apply it only to a portion of cardholders. The study further documents how the increasing popularity of debit cards is eroding usage of checks and cash for consumer payments. In the results issued last month, the share of point-of-sale payments made electronically?that is, on credit, debit, and prepaid cards–had risen from 43% in 1999 to 54% last year. The entire gain came from soaring use of debit cards, whose share went from 21% to 31%, since the share claimed by credit cards remained almost constant at 21%. Dove conducted the survey in conjunction with the American Bankers Association. Results were based on 2,008 completed surveys, a sample Dove says is representative of the U.S. population. Some results from the study, the third Dove has conducted since 1999, were released in December. The further results released this week concentrated on debit cards.