U.S. credit card volume increased by $185 billion in 2011, while debit and prepaid volume increased by $199 billion, according to a research report released today by MasterCard.
The report, titled "Smarter Spending and Saving: Evolution in U.S. Consumer Behavior," noted that the growth is due to changing consumer spending habits, evolving strategies on the part of merchants and financial institutions and a continued migration to electronic media at the expense of cash and checks.
According to the report, debit and prepaid’s growth came both from an increase in spending and at the expense of cash and checks. MasterCard estimates that $138 billion (75 percent) of credit’s 2011 gain was due to an increase in consumer spending. This is a result of rising prices and increased confidence on the part of consumers, the company said. In contrast to 2010, discretionary purchases in 2011 were not a key driver of incremental growth. Approximately $13 billion (7 percent) in growth likely derived from small business owners using their personal credit cards to supplement credit lines, or because they were unable to obtain a business credit card.
Another factor leading to the increase in consumer spending was that 2011 was not a year of cutting down debt and reducing household budgets, as 2009 and 2010 were.