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Debit Cards Now Favored Over Checks

January 3, 2005
Surveys conducted by the Federal Reserve confirm that electronic payment transactions in the United States have exceeded check payments for the first time.

The Fed said the number of electronic payment transactions totaled 44.5 billion in 2003, while the number of checks paid totaled 36.7 billion, according to recent surveys of U.S. depository financial institutions and electronic payments organizations.

Previous research found that the number of checks paid in 2000 was 41.9 billion transactions, compared with 30.6 billion electronic payments. Electronic payments consist of such payment methods as credit cards, debit cards and automated clearinghouse (ACH) transactions, like direct debit.

"The balance has shifted from check writing to electronic payments, and we expect this trend to continue," said Richard Oliver, senior vice president of the Federal Reserve Bank of Atlanta and the Federal Reserve Banks' product manager for retail payments.

"Indeed, at current growth rates, credit cards and debit cards will both surpass checks in terms of total annual transactions in 2007. Such rapid change presents opportunities and challenges for an industry traditionally geared toward paper-based payments. The value of these surveys is that they quantify this shift and provide important insight for all industry participants."

The study consists of two research efforts commissioned to estimate the annual number, dollar value, and makeup of payments in the United States, and to estimate the annual volume of electronic payments.

The first survey, the Depository Institutions Payments Survey, included responses from more than 1,500 depository financial institutions (commercial banks, savings institutions and credit unions). The second research effort, the Electronic Payment Instruments Study, included responses from 68 organizations involved in originating, switching or processing electronic payments.

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