Debit Is Consumers’ Preferred POS Payment Method, Well Ahead of Credit Cards

Debit cards are the most widely used form of payment, while credit cards rank a distant third, a new study from J.D. Power says.

Some 78% of consumers use debit cards at the point of sale, followed by cash (74%) and credit cards (66%), according to the survey. Other forms of payment cited by consumers include digital wallets (36%), gift cards (33%), buy now pay later (28%), merchant apps (20%), checks (19%), prepaid cards (14%), pay by bank (7%), and cryptocurrency (3%).

The leading reasons consumers give for paying with a debit card are that it gives them a way to track and manage their spending, speeds the transaction, and offers ease of use, says Miles Tullo, managing director for banking and payments at J.D. Power.

Interestingly, a key reason credit cards rank behind debit cards is the growing popularity of buy now, pay later options. “When you look at the usage levels for BNPL, which is a form of credit, it’s clear there is some cannibalization of credit card usage,” says Tullo. “BNPL is not something financially unhealthy consumers use to help manage their finances. Financially healthy consumers use it, too, because they like the terms and it helps them avoid incurring interest charges on balances they may have revolved on a credit card.”

When consumers do pay for a purchase with a credit card, they are usually driven by the opportunity to earn rewards. “But overall, the factors that drive credit card usage are not enough to rank credit cards higher,” Tullo adds. 

In addition to debit and credit, consumers will use a variety of other payment options, depending on such factors as ease of use, terms, and their perception of the social status associated with different forms of payment. As a result, consumers spread their purchases over 4.1 distinct payment methods, on average, according to the study.

“There are a lot of factors that drive payment usage, and the reasons for using a specific payment option vary by customer segment, which means you can’t look at the payments market in a holistic manner because consumers become interested in using a specific payment method for different reasons,” Tullo says.

When it comes to non-traditional payment methods, 55% of the more than 47,000 consumers surveyed by J.D. Power in the past 90 days say they have used such methods as digital wallets, BNPL, merchant apps, and cryptocurrency. Digital wallets were the most frequently used (36%), followed by BNPL (28%).

Given the pace at which the POS payment landscape is moving, along with the growing number of payment options available to consumers, it is not surprising there is a splintering of the total addressable consumer market for payments, Tullo says.