More than 60% of consumers prefer using a debit card (rather than a credit card) because it is more like 'real money', and more than one-third of debit card users (38%) consider a loyalty debit card (with rewards) to be an important part of their banking relationship, according to a study by TNS Financial Services.
The Consumer Credit Card Program Study suggested that banks can potentially establish or deepen relationships with customers by offering debit cards with reward programmes.
The study found that more than half (57%) of households that have both a rewards debit card and a rewards credit card are likely to use the debit card in preference to the credit card.
Debit reward acceleration
According to Larry Kinitsky, senior vice president for TNS Financial Services, "Fewer than one in ten debit card users are using cards connected to a rewards programme. This is due to banks only recently adding them to their list of offerings. But, given the level of consumer interest in debit card rewards, we anticipate this relatively new market to grow rapidly over the next several years."
The overall growth prospect for debit cards is very positive. Almost two-thirds (65%) of debit card users surveyed said they are paying less often with cash and cheques than they used to. Between 2002 and 2005, the number of households using an ATM or debit card has grown from 47% to 60%.
Among debit card users, 27% are up to 35 years old, 46% are aged 35-54, and 27% are aged 55 or over. More than half (61%) of debit card users who currently have debit card rewards are aged 35 or over.
Interestingly, the level of household income is not of such great influence as age on the use of rewards-based debit cards, with half of the users earning less than US$50,000 annually, and half earning at least US$50,000 annually.
According to TNS, there is a clear, unmet demand for rewards debit cards, offering great potential for banks to build more profitable customer relationships and generate a new revenue stream from more frequent debit card use at more locations than might otherwise be supported by cash and cheque payments.
According to Kinitsky, "With debit card use surging and credit card use remaining stable, there has never been a better time for banks to take advantage of the opportunities to link rewards programmes to debit cards."