Many people don’t need algorithms to decide which payment card to use. My personal model is that I only use my debit card when I need cash from an ATM. Fees make it a ridiculous proposition for a credit card. When shopping, I default to the issuer with the best benefit. Sometimes it might be the quarterly bonus special, with one issuer giving 5% for shopping at Home Depot, and another giving 5% rewards for a supermarket. It is fun to stack up reward points when you have healthy spending habits.
The more practical course is to follow the card design. If the purchase is a consumable product, you take out your debit card; if it is a discretionary purchase, you select your favorite credit card.
• Credit or debit? For routine purchases, Americans are likelier to say debit.
• U.S. card issuers would prefer a different answer.
• Credit brings in far more revenue.
• First, the banks charge higher “interchange fees,” fees paid by merchants, on credit card purchases; the typical fee on a debit purchase is limited, by regulation, to 0.05 percent plus about 22 cents, while a credit interchange fee can exceed 2 percent.
Chase enjoyed overwhelming success with its Sapphire Reserve card, which has some impact to the debit-credit space wars.• Last year was also when JPMorgan Chase launched a new premium credit card, the Chase Sapphire Reserve card, to much fanfare.
• So many people signed up, most of them millennials, that Chase temporarily ran out of cards.
• American Express counterattacked in March by sweetening the perks on its premium Platinum card.
• An Amex executive said the company is in “hand-to-hand combat” with Chase to win over new card customers.
Well written article in Bloomberg. Plenty of good factoids from TSYS’ annual survey are steeped into the report.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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