Most noncash payments made electronically, but consumers still avoid credit card debt

As of the end of 2009, electronic payments made up a vast majority of all noncash transactions, accounting for more than three-quarters of these purchases, a new report from the Federal Reserve Board said. This represented an increase of 9.6 percent over the previous study, conducted in 2007, when this type of transaction made up just two-thirds of all noncash payments.

The number of noncash payments has increased 4.6 percent per year between 2006 and 2009, only slightly higher than the 4.5 percent pace observed in the previous three-year period, the report said. Meanwhile, the value of these noncash payments declined 1.6 percent per year after growing 3.9 percent in each of the previous three.

"The results of the study clearly underscore this nation's efforts to move toward a more efficient electronic clearing system for all types of retail payments," said Richard Oliver, executive vice president of the Federal Reserve Bank of Atlanta. "It is also likely that the results reflect changing consumer behavior during difficult economic times."

All types of electronic payments made during the three-year period saw increases, with the exception of those involving credit card debt, the report noted. Meanwhile, debit card transactions increased to make up a larger share of the total of noncash transactions, largely replacing checks.

In all, debit card purchases made up 26 percent of noncash payments in 2006, but rose to 35 percent by 2009, the Fed reported. Meanwhile, the number of transactions involving credit card debt slipped from 23 percent to 20 percent.

Annual use of debit cards increased by over 12.8 billion payments, reaching a total of 37.9 billion in 2009, the report said. Additionally, transactions in which consumers took on credit card debt declined by 100 million to 21.6 billion in 2009.

Consumers have continued the trend of eschewing credit card debt in favor of other types of purchases into 2010. During this holiday season, less than one-fifth of consumers say they will rely mainly on credit to make their gift purchases, instead leaning on debit, cash and prepaid cards when out shopping.