NEW YORK, Oct. 2, 2013 (GLOBE NEWSWIRE) -- Within the consumer banking industry, there is a perception that all payments cards, whether credit, debit, charge or even prepaid cards, are interchangeable payment methods. But according to recent consumer research published in Cardbeat®, a syndicated research report published by the Auriemma Consulting Group, Inc. (ACG), a significant portion of U.S. consumers see different types of payment cards as serving distinct purposes.
Nearly four in ten (37%) respondents said that debit cards do a good job of helping manage their finances, compared to just 26% who said the same about credit cards. In fact, one in five (20%) respondents said that credit cards do a poor job in this area, a higher incidence than for any other payment method. Yet credit cards rated highly when it comes to being "helpful in case of emergency", with an average rating of 8.68 (where 10 means "describes extremely well"). Younger consumers, in particular, see credit cards as valuable tools for buying things they plan to (or need to) repay over time, but not necessarily a tool they would use for everyday spending.
Matt Simester, Managing Director of the Payments Insights practice at ACG, says there seems to be a widely-held consumer mindset that different cards are most appropriately used in different circumstances. For example, he notes that Cardbeat showed that credit cards enjoy higher average spending than debit in general, but consumers tend to use their debit cards more frequently for regular, day-to-day types of purchases, such as weekly groceries, drugstore items and gas purchases for their vehicles. By comparison, general-purpose credit cards are more likely to be used for higher-ticket items, such as major appliances, online store purchases, and department store purchases.
So does the future of payments belong to debit rather than credit cards? Not necessarily.
Mr. Simester says that credit cards continue to offer valuable rewards that debit cannot in a post-Durbin Amendment world. But banks may also wish to consider re-positioning traditional credit cards and getting back to basics when the interest-free periods were positioned as cash flow or budget management tools. He adds "I could see products that are credit cards but behave like debit cards in some instance whose balance is repaid in full with an automatic deduction from the consumers' checking account for certain items. A more advanced variation might use credit card authorizations to reduce the available balance in a consumer's checking account, ensuring that the funds in the checking account are likely to be available when the credit card cycles."
Mr Simester also says that consumers are looking for banks to help them solve their financial management challenges. Fulfilling those needs can go a long way towards ensuring that credit cards can stay relevant for a new generation of consumers.
About Auriemma Consulting Group
Since 1984, ACG has offered comprehensive management consulting, research, industry roundtable and benchmarking services to the financial services industry. ACG clients include credit card issuers and networks, commercial banks, mortgage lenders, merchants, and industry vendors. With offices in New York and London, ACG offers actionable solutions to help clients make important business decisions to maximize their efficiencies and revenues. For more information, please contact Matt Simester at 212-323-7000 or matt.simester@acg.net.