Consumers Not Quite so Enamored With Debit Cards as Before, TSYS Study Finds

Debit cards are still Americans’ favorite payment type, but they’re not quite as popular as they were two years ago, according to new survey findings from Total System Services Inc. (TSYS). The payment processor’s fifth annual Consumer Payment Choice Study, which in June surveyed more than 1,000 consumers with at least one credit card and one debit card, also found that slightly more than a quarter of consumers have received a chip card, and that mobile-payments usage is still low.

Some 41% of respondents in the online survey named debit cards as their most preferred payment type in 2015, down from 43% last year and 49% in 2013. Credit cards remained steady in popularity, most preferred by 34% of respondents in 2013 and 35% in 2014 and 2015.

What’s behind this dip in debit popularity? “The reduction in debit appears to be due to respondents preferring cash and PayPal or other alternative payments at a higher rate than that of last year’s study,” the survey report from Columbus, Ga.-based TSYS says.

One factor that could be influencing debit’s popularity is consumers’ feelings about payment security. In that respect, debit comes in last. When asked which payment form they feel safest using for online purchases, 34% cited credit cards, 28% said PayPal, and only 17% cited debit cards. Asked the same question regarding in-store purchases, 38% said cash, 27% said credit cards and 24% said debit cards.

Income, age, and merchant type also affect payment preferences. Majorities of three income groups of $75,000 or less annually all preferred debit, while three groups above $75,000 preferred credit. Meanwhile, strong majorities of consumers up to age 34 prefer debit over credit, as did those in the 45-to-54-year-old age group (43% favoring debit versus 32% for credit).

In other findings, 27% of survey respondents reported having received a new chip card from their bank. Sixty percent said they hadn’t received such a card, and 13% were unsure.

The payment card networks’ EMV chip card liability shift takes effect Thursday, upon which a merchant or card issuer that doesn’t support EMV in a transaction will be liable for any resulting counterfeit fraud.

Of those who had received a chip card, 50% said yes when asked if they had made a purchase by inserting the card into a point-of-sale terminal as opposed to swiping it. Forty-five percent said no, and 5% were unsure.

Regarding the controversial topic of PINs and chip cards—merchants want EMV credit cards to have them while most issuers are opting for so-called chip-and-signature authentication—43% of respondents said no when asked if their new chip card required them to use a PIN. Some 40% said yes, and 17% were unsure.

“The uncertainty in the answers from our respondents concerning chip cards supports other industry findings concerning the importance of consumer education around chip cards and their use,” the report says. “This need for education will continue as chip cards are more widely distributed and more chip point-of-sale terminals are enabled.”

Released the same day that smart-phone manufacturer Samsung Electronics America Inc.’s new Samsung Pay service went live, the survey also says consumer interest in using a mobile device to make a purchase “continues to grow, but still remains relatively low.”

Presented with a dozen options stating how consumers could use mobile devices for financial activities, using “your phone instead of a payment card to make purchases when checking out of a store” ranked tenth, cited by only 26% of respondents. The No. 1 option, cited by 54% of respondents, was using a phone to stop a transaction that the consumer hadn’t made.

Despite the low current volume of mobile purchases, TSYS predicts that growth in the sector “will continue as more mobile-payment options become available to consumers.”