More holiday cards are debit

DALLAS — When consumers step up to the cash register to pay for their holiday purchases this year, a large percentage will pay with a debit card.

Debit cards have overtaken credit cards and other noncash methods as the payment of choice among consumers.

Visa, the global payments technology company, said debit cards passed credit cards last December, representing a fundamental shift in consumer behavior.

Gone are the days of cash and checks.

“In general, debit card use has been growing for many years, and we expect that trend to continue for the foreseeable future,” said Bob Whyte, head of consumer debit products, North America, at Visa.

There are several reasons for the trend.

“There's a perfect alignment of the product with the mood of the consumer today,” Whyte said. “There's a recognition that debit cards provide a great sense of control,” he said. “There's also a great appreciation for the safety of the product. It's safer than carrying cash, which can be lost or stolen.”

Other reasons include the fact that consumers are trying to pay off their bills and don't want to take on more debt; and some people are using debit cards in a backlash against credit card companies, which have been raising annual percentage rates, slashing credit limits and instituting fees in response to new credit card regulations.

One of the main differences between debit and credit cards is that debit cards are linked directly to your bank account, while credit cards enable you to charge purchases against a preapproved credit limit.

But debit cards and credit cards are becoming more similar. For example, some financial institutions are starting to offer rewards on their debit cards as they do with credit cards.

Another similarity is cardholder liability. Federal regulations require financial institutions to cap your liability at $50 if you notify your financial institution within two business days from the moment you learn that your debit card has been lost or stolen.

And many financial institutions have gone beyond federal regulations and adopted zero cardholder liability policies on unauthorized use of debit cards.

A crucial concern for debit card holders is overdrawing their accounts.

“Most overdrafts today are caused by debit cards,” said Carol Kaplan, spokeswoman for the American Bankers Association.

The Federal Reserve recently imposed rules that will make it harder for banks to slap customers with overdraft fees, which one consumer group — the Center for Responsible Lending — said average $34 per transaction.

The new rules will take effect July 1.

Consumer groups and lawmakers have chastised banks for using “courtesy overdrafts” to pay transactions even though customers don't have the money in their accounts to cover them.

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