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Consumers opt for other payment options over credit cards

[Tuesday, January 11th, 2011]

In an effort to fix their bad credit history, an increasing number of consumers are opting for alternate modes of payments as compared to credit cards. This move not only ensures that customers spend within their means; it also helps customers reduce their debts at a faster rate. A majority of the people shopping for the holidays are also opting for payments through debit cards as compared to credit cards. One of the payment studies conducted by the Federal Reserve Board in 2010 has confirmed this trend. The Federal Reserve Board conducts this study once every three years to find out the current payment trends.

For three years, between 2003 and 2006, the use of credit cards increased by 3.9 percent each year. In comparison, over the last couple of years, the use of these plastic cards has fallen by 1.6 percent each year. This is a clear indication that consumers using their credit cards to make purchases have declined just before the economic recession started.

Federal Reserve Bank of Atlanta`s Vice President, Richard Oliver, said that this trend is a clear indication of the change in customers` behavior after the economy hit rock bottom. The study saw an increase in the number of payments being done using debit cards. While some people also prefer online payments, it was clearly debit cards that were the most popular mode of payment. The study has revealed that there was an increase of 12.8 billion payments by debit cards, which represented a total increase of 14.8% per year.

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