Increased debit fees won’t change consumers’ use

A number of the nation's largest financial institutions have recently proposed changes to the way in which they charge consumers for using debit cards, and though consumers have sworn to find alterative payment methods, some experts don't believe the resulting change will be seismic.

Joseph Saunders, chief executive officer for Visa, recently said that despite consumer sentiment turning against financial institutions who plan debit card use fees, the number of debit transactions – and the value of those purchases – is unlikely to change, according to a report from The Associated Press. Visa, the world's largest processor of both debit and credit card transactions, believes that even if consumers do make good on their promises to switch to new financial institutions that do not charge for debit use, they will still use the debit accounts issued by those new banks.

"All of the banks recognize that their customers have an option to move to a competitor," Saunders said on a conference call with reporters, according to the news agency. "That being said, I don't believe that anything that's happening is going to substantially alter the macro debit volume in the United States. I don't think debit use is going to go away."

In addition, even those consumers who are considered underbanked and may not be able to open new checking accounts to which they can link debit cards will likely continuing using debit, just in another form, the report said. Saunders said that Visa has seen an appreciable jump in the number of transactions being completed with prepaid cards, which are expected to continue growing in popularity, particularly if new debit fees drive out more consumers.

Further, even if consumers don't turn to prepaid cards, they will likely simply begin using credit cards to complete a greater number of transactions than they currently do, the report said.

Visa saw both debit and credit card use expand in the fourth fiscal quarter of the year, though the latter did so more than the former, the report said.

Many Americans have likely looked to debit card use in recent months as an alternative payment method while they attempted to reduce debt. This type of card grants them the same payment flexibility they have likely come to expect from credit card use, but does not result in additional debt.