Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response


  • The views expressed herein are those of the authors and do not necessarily reflect those of the Board of Governors or the staff of the Federal Reserve System. The authors thank Kevin Moore and Gerhard Fries for calculations using the Survey of Consumer Finances, and Elise Tosun for outstanding research assistance. The authors would also like to thank the Editor Deborah Lucas and two anonymous referees for their helpful comments and suggestions.


Debit card use at the point of sale has grown dramatically in recent years in the United States and now exceeds the number of credit card transactions. However, many questions remain regarding patterns of debit card use, consumer preferences when using debit, and how consumers might respond to explicit pricing of card transactions. Using a new nationally representative consumer survey, this paper describes the current use of debit cards by U.S. consumers, including how demographics affect use. In addition, consumers' stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments. We also examine the relationship between household financial conditions and payment choice. Finally, we use a key variable on bank-imposed transaction fees to analyze price sensitivity of card use, and find a 12% decline in overall use in reaction to a mean 1.8% fee charged on certain debit card transactions; we believe this represents the first microeconomic evidence in the United States on price sensitivity for a card payment at the point of sale.