Analysing payment trends: credit cards v. debit cards

Electronic payments are on the march wherever you look. From the surge in contactless transactions across Europe to booming card payments in Asia, non-cash transactions are rising globally.

At the centre of all this lies the humble debit card and credit card.

By the end of 2014 there were 12 billion cards in circulation worldwide, which is a rise of 11 percent from the year before, highlights a new report from the Payments UK industry body.

“The number of cards continued to grow highlighting the important role cards play globally for consumers, businesses and governments, providing convenience, safety and familiarity in payment choices,” the study said.

“The type of card used within each country varies greatly from debit, credit and charge cards to prepaid cards and multi-functional cards.”

Debit cards

Debit cards are the most common type of cards held, performing a wide variety of functions. In some countries they’re even used for identification.

Increasingly, banks issue a debit card automatically with a standard checking account, rather than an ATM-only cash card.  Moreover, since the global recession, many consumers prefer to use debit cards over credit cards to avoid over-borrowing.

In 2014, China was the largest single card market in the world, Payments UK’s report shows. The country had 4.5 billion debit cards in circulation, a doubling in number from 2010. There are 3.28 debit cards per person in China, ranking it second behind Japan.

On average, each person in Japan held 3.3 debit cards in 2014, making it the global leader for debit cards.

Australia comes in third with 1.75 debit cards per person, with the Netherlands (1.52) number one for Europe and fourth overall. The UK is fifth with 1.48 debit cards per person.

Interestingly, there are just 0.94 debit cards per head in the US. Almost uniquely, that is well below the number of credit cards per person.

Credit cards

Moving on to credit cards, the US leads with 2.9 per person, with Canada following close behind. It’s clear that the North American model of card use has developed differently to the rest of the world. Canada, too, has just 0.7 debit cards per head compared to 2.16 credit cards each.

This, say the report authors, indicates how there is a “far higher tolerance for taking on unsecured debt” in the US, and implicitly, Canada.

The UK (1.0) and Australia (0.88) rank highly again for credit cards, suggesting that these countries are just plain keen on using cards over cash, or checks. Indeed it’s worth noting how these are two countries very much leading the contactless push.

“Evolving technology, new card products and the expansion of online shopping gave the Australian card market a significant boost in the five year period between 2010 and 2014,” notes the report.

Mainland Europe is clearly less enamoured with unsecured debt – just 0.06 per head of the population in Germany owns a credit card. The figure for France is just 0.10 per cent, while in the Netherlands it is 0.19 per cent.

On the other hand, Spain, Germany, France and Italy are much larger charge card markets – charge cards require the balance to always be paid off in full each month.

“Consumers in countries such as the Netherlands and Germany are culturally more averse to credit, and as such the number of cards in issue and outstanding credit balances are far below those in the UK,” notes Payments UK in the report.

Prepaid cards are barely touched on in the study, but we know these, too, are on the rise globally as an alternative to traditional debit and credit cards.

What’s evident is that while one country prefers the flexibility of credit cards and another likes the certainty of a debit card or charge card, there is generally a plastic option that works in most scenarios.

Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

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