Debit card use surpasses credit card use

Increasingly, consumers are opting to skip using a traditional credit card, opting instead for their debit cards.

Why? One reason, The Wall Street Journal's Wallet blog said today, is that it's harder to get a credit card.

Another is that consumers simply don't want the debt. Result: More than 58% of card transactions are now paid with debit cards, the Journal said, citing data from the Nilson Report, which tracks credit card trends.

Debit cards now represent 38.3% of card dollars spent, compared to only 26% in 2002.

Part of debit’s rise can be attributed to the overall tightening of credit. Part of it could also be consumers trying to use debit to manage their budgets more efficiently.

An advantage of using a debit card is that it’s virtually impossible to rack up debt. The downside is that banks are notorious for socking consumers with overdraft fees.

Conversely, as once-juicy credit card rewards programs ramp down, the incentives to use credit cards have as well.

Although federal law mandates stronger protections for credit cards, in practice, most issuers treat both the same in cases of fraud, says James Van Dyke, president and founder of Javelin Strategy and Research.

Historically, debit cards have not been as big of a moneymaker for banks due to their lower interchange fees -- the charges that the bank earns when a card is used.

Debit cards were marketed as a lure to hook consumers into more-profitable financial products, such as credit cards and home-equity loans. Issuers now are rolling out debit rewards programs that offer incentives in points or cash.

There are two winners from debit cards: MasterCard (MA) and Visa (V), the big processors of plastic transactions.

MasterCard is up 41.6% this year. Visa is up 31.6%.