Has Coronavirus Tipped the Scales Toward Debit Cards?
The coronavirus has changed the business landscape in all sorts of ways. One shift that hasn’t gotten much attention: how it’s changing customers’ payment preferences.
You might have seen it at your own register: Cash — which was already losing popularity — rarely gets used. Credit cards are losing steam because consumers are afraid of debt. In their place, debit cards are becoming the go-to payment methods.
What’s behind the shift toward debit? Pop the hood on this trend, and you’ll see 10 factors at play:
- Health concerns
Even though health experts say the coronavirus is unlikely to spread through cash exchange, many businesses have chosen to bypass cash altogether. Brand image is vital in today’s world, so every company wants to be seen as doing all it can to protect its customers.
Debit cards don’t pass through dozens of hands. Most consumers are more comfortable with handling their own card than trusting people who use paper currency to wash their hands. Can you blame them?
When you pay with cash, you typically get change back. Sales taxes ensure even products priced at round numbers result in odd totals. The trouble is that coins are difficult to keep track of and cumbersome to actually spend.
Debit cards have the power of cash without the inconvenience. Virtually every company has a card reader these days, and consumers are directing every spare dime to their savings accounts.
- Fear of debt
Many Americans have thousands of dollars in credit card debt. That can be daunting at any time, but it’s downright scary during a recession.
The coronavirus has raised unemployment to record levels. Even people who are still employed are constantly worried about losing their job. Losing one’s income makes paying debts awfully difficult.
No wonder debit card transactions are growing 3.5 times faster than credit card swipes. Consumers know that debit cards can’t put them in debt: If their account doesn’t have enough money to make the transaction, their card simply gets declined.
- Growth in e-commerce
E-commerce sales are 40 percent higher than they were before the coronavirus hit American shores. As online shopping increases in response to social distancing, so does debit card usage.
It’s impossible to pay online with cash. A debit card lets you buy groceries online, shop on Amazon, and pay for services remotely.
What about credit cards? Some vendors, such as governments and utility companies, either don’t accept credit cards or charge an additional fee. For those digital transactions, debit cards may be the only option.
- Easy transaction tracking
Remember when your parents taught you how to balance a checkbook? Keeping track of what you spend on paper can be tedious and time-consuming. Miss one purchase made with cash, and your monthly balance won’t add up.
Because debit card transactions are logged in an online dashboard, they make it easier for consumers to keep an eye on their finances. The coronavirus has given everyone a reason to budget carefully. With a debit card, that becomes a lot easier.
- Speed and convenience
If you dared to venture outside during stay-at-home orders, you probably did your best to get back home as quickly as possible. Why put yourself at risk for longer than necessary?
Making payments with cash takes time. The payer has to count out the bills, only for them to be counted again by the person receiving them.
Debit cards are faster and easier than paying with cash. Swipe it, enter your PIN, grab the receipt, and you’re good to go.
- Direct deposit
Thanks to the coronavirus, remote work has gone from a rarity to the norm. Many high-profile companies have decided to extend the arrangement even after the coronavirus ends.
When employees aren’t at the office, they can’t pick up a physical check. Instead of mailing paychecks, many business leaders are opting for direct deposit.
Direct deposit requires a checking account, which typically comes with a debit card. Debit cards make it possible to spend that income without withdrawing cash.
- Mobile payment options
Another trend that’s growing, thanks to the coronavirus, is mobile payments. With these systems, consumers merely tap their phone at the register. And because they touch their phones for all sorts of other reasons, there’s no added risk of picking up the virus by paying on a mobile device.
Many entrepreneurs are big fans of mobile payments as well. Not only does the model minimize human contact, but it can also bring a new generation of consumers in the door.
- Round-up features
The coronavirus reminded America that saving money is important. With no money to fall back on, an unexpected recession can go from difficult to devastating.
Some debit cards offer a round-up feature, which moves money into a linked savings account every time a transaction is made. Consumers don’t want to worry about scheduling transfers between their checking and savings accounts, and some of them don’t have money left over at the end of the month, anyway.
- Reduced risk of loss or fraud
Right now, many consumers are in a precarious financial position. Losing $20 might not be a big deal in normal times, but it might make or break their budget right now.
When cash is lost or stolen, it’s usually gone forever. Debit cards can be frozen at the click of a button. What’s more, many debit cards now have zero fraud liability, meaning that any money spent by someone who wasn’t authorized to do so is not the responsibility of the cardholder.
Think about it, and it’s not so surprising that consumers are gravitating toward debit cards at a time like this. They’re easy to apply for and acquire, and there’s little risk of going into debt or being robbed when carrying a debit card.
Plus, debit transactions are better for business owners. Less cash means fewer runs to the bank and shorter lines at the register. Interchange fees are typically lower on debit cards than they are for credit cards. Why not give your customers what they want?