December 23, 2013

Debit card usage among U.S. consumers has declined to the lowest level since the passage of the Durbin amendment, according to a study released this month by Mercator Advisory Group.

The Durbin amendment, part of the Dodd-Frank financial reform bill, caps the amount banks can charge retailers for swiping their debit cards. The cap limits the fee to an average of 24 cents per transaction instead of the previous industry average of 44 cents. The new limit took effect in the summer of 2011.

The Mercator study found that debit account fees that many banking institutions have found necessary to charge to compensate for revenue they lost due to Durbin’s limits have driven consumers away from debit cards.

According to Mercator, debit card penetration in the United States declined over the past two years from a high of 68% in 2011 to a new low of 59% in 2013, as more consumers began using prepaid cards and nontraditional payment forms.

The report, titled "Consumers and Debit 2013: A Shift to Alternative Payments," also found that young adults, who have traditionally been more likely than average to use debit cards, are now no more likely than average to use a debit card. Further, debit card penetration of households that earn less than $75,000 a year is also declining faster than average, while at the same time, use of general purpose reloadable prepaid cards is growing, particularly among young adults, although it that growth still minimal, Mercator found.

The report is based on results from Mercator Advisory Group’s CustomerMonitor Survey Series online panel of 3,003 U.S. adult consumers surveyed between May 28 and June 6.

[Related Content: Banks Lose Millions Due to Durbin Amendment: Report]

ABOUT THE AUTHOR
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as ...