Credit vs debit: It’s still a close race

October 17, 2017
4 min read

Credit cards are the most preferred way for US consumers to pay for purchases, especially more expensive purchases, according to Mintel’s report on payment preferences in the US. However, young consumers, including younger Millennials and Gen Z, still reach for a debit card more often than a credit card: 40% of younger Millennials, those between the ages of 23 and 30, prefer to use their debit card, regardless of the purchase size, compared to 26% who prefer to use credit. Among Hispanic consumers of all ages, the majority still prefer to pay with debit compared to credit.

64% of US consumers agree that debit is a good way to stay out of debt.
There are some definite benefits to paying for purchases with a debit card such as better financial control, less risk of getting into debt, and the fact that a debit card is typically easier to obtain than a credit card. In fact, two out of three consumers have or use a credit card, while nearly 80% have a debit card. Mintel research found that consumers are generally wary of getting into debt, and 64% agree that debit is a good way to stay out of debt.

In the second annual State of Gen Z 2017 Study, The Center for Generational Kinectics found that over 20% of Gen Z respondents believe that personal debt should be avoided at all costs. This study also referred to Gen Z as the “throwback generation” because of their strong work ethic, pragmatic outlook, and money-saving habits.

Today’s consumer is at risk of being overwhelmed by the number of payment options available to them, which is a reason for financial marketers to fight for that coveted “top of wallet” spot. Whether your brand is promoting a debit or credit product, the important thing to remember is that the most effective incentives to get consumers to switch their payment choice are the same for both: rewards and discounts.

Promoting debit cards with sweepstakestd bank

Mintel Comperemedia’s Card Usage: Debit Card Loyalty, Rewards and Engagement report found that the most common debit card usage direct marketing campaigns focused on everyday card use and typically used seasonal or holiday-related events such as back-to-school or holiday shopping. A sweepstakes is one of the more popular usage strategies for debit cards, and email is an effective way to communicate this. TD Bank recently emailed customers with the subject line, “[name], your next debit card purchase could be your winning ticket, thanks to Visa®.” Customers who make a purchase with their TD Bank Visa Debit or Credit Card between September 4 and November 15, 2017 are automatically entered to win a trip to Super Bowl LII in Minneapolis, Minnesota. Customers also get a bonus entry for all purchases of $15 or less – an extra push towards the everyday items they know customers are paying for with debit. TD Bank sent approximately 1.54M of these emails on September 25, and it attracted a 35.2% read rate.

One could argue that as these younger Millennials and Gen Z consumers grow up, they will shift toward credit cards just like their older peers. However, embracing younger consumers and encouraging the use of debit is also a way to build strong relationships with these customers who are making the effort to be responsible and develop healthy financial habits early on. Marketers that can incorporate credit management solutions and educational services around debt will likely find an engaged market with the debit card users of today and the credit card customers of tomorrow.

Lily Harder is the Vice President of Research for Mintel Comperemedia. Lily specializes in the financial services industry, researching and presenting on the latest industry trends, competitive intelligence insights and newsworthy developments.

Lily Harder
Lily Harder

Lily Harder is Vice President of Research, Mintel Comperemedia. She specializes in financial services, researching industry trends and competitive intelligence insights.

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