Fifth Third Bank has introduced a new card that serves as both a debit card and a credit card.
Other institutions have been testing cards with this capability but Fifth Third is the first to offer the card, called Duo, to its customers.
"Many consumers see the value in both debit and credit options and choose their payment method at the point of sale for a variety of reasons," Jon Groch, the senior vice president and director of Bankcard Services for the bank, said, according to NYTimes.com. "The Duo Card gives these consumers the freedom to choose how to pay and access their cash without having to carry multiple cards."
Research indicated that Fifth Third customers preferred to use debit cards for smaller purchases and credit cards for larger purchases that they want to pay off overtime.
In order to obtain a Duo card, Fifth Third customers must have a checking account at the bank and then apply for the Duo card as they would for any other credit card, according to NYTimes.com.
To make a transaction with a Duo card, customers swipe the card and select “debit” or “credit” on the terminal.
Citibank has been testing a similar product that offers the option of paying directly with rewards points that the Duo card does not provide. Citi’s card, 2G, which stands for second generation, will be available later this year.
Such cards are a way for banks to encourage more use of credit since these products do not offer a signature debit option, NYTimes.com reports.
The Federal Reserve recently said that signature debit transactions have higher fraud costs than PIN transactions.
“As a result, we believe that banks are beginning to explore steering customers toward credit card transactions in place of signature debit transactions,” Darrin Peller, an analyst from Barclays Capital, said, according to NYTimes.com.