Consumers torn between debit, cash

A recent report by financial industry consultant Javelin Strategy & Research revealed that consumers are conflicted about their preferred method of payment.

The report examines recent debit card regulations and their effect on consumers. Since the implementation of increased federal regulations on debit and credit card fees, consumers have seen a back-and-forth battle between banks and merchants. In the end, consumers receive a baffling myriad of mixed messages about which payment type to use.

"Consumers love their debit cards, but the majority would choose different payment options if they were charged a fee for using debit," Beth Robertson, the director of Payments Research at Javelin, said.

Rising costs for debit and credit transactions have led some merchants to encourage the use of cash or checks, especially to purchase low-cost goods. Financial institutions have responded to the debit fee caps by marketing more profitable credit cards.

Many consumers are doubtful that these incentives will help small businesses. According to the study, 70 percent of consumers believe that the incentives will benefit banks, while 30 percent believe they will help merchants.

James Van Dyke, the president of Javelin, said that consumers simply don't understand the pros and cons of available payment options.

"The recession led many people to turn away from credit cards in favor of debit and prepaid cards as ways to control debt, but this trend seems to be slowing  as the economy stabilizes," Van Dyke said. "Today, there are more conflicting pressures on payment choice than ever before. Stakeholders should monitor payment trends and identify profitable ways to influence the payments mix.

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