Americans spending less on their cards could change processing

Two of the nation's largest processors of credit and debit card payments will announce their quarterly earnings later this week, but experts say that consumers' new credit card spending habits could have a major effect on those figures.

While consumer spending rose 2.9 percent between January and March, the fastest pace for any quarter in more than a year, fewer consumers put the majority of their purchases on their credit cards, which could be troublesome for the world's two largest debit and credit card payment processors, Visa and MasterCard, according to a report from the Associated Press. Data from the Federal Reserve Board indicates that the value of all credit card charges processed in January and February alone dropped by more than $5 billion.

Experts say that this may be the result of consumers' continuing to be wary of taking on large amounts of credit card debt even as the economy has continued to make considerable improvements over the last year, the report said. Many Americans curtailed or even cut out their credit card spending significantly during the recession, and while some have slowly begun to return to relying on their cards in the way they did prior to the economic downturn, most are not. Indeed, the most recent data from the Fed indicates that the more than $799 billion in outstanding credit card debt in February was 15 percent below the amount held in December 2007, right at the outset of the recession.

However, one segment of the U.S. population is continuing to make more purchases on their credit cards in the wake of the recession, the report said. Data from other payment processors and lenders indicates that affluent consumers increased spending by more than 12 percent in the first quarter of 2012 on a year-over-year basis.

Why Visa and MasterCard may be worried about consumer habits

The reason that reduced credit card usage is troublesome for payment processors like Visa and MasterCard is because consumers then increase their reliance upon debit cards for day-to-day purchases, and that means that the credit card companies earn less money from the processed transactions as a direct result, the report said. However, recent federal laws have restricted the amount they can charge for processing a debit transaction, while no such regulations are in place for credit cards.

The current payment rules state that companies can only charge 44 cents per debit card purchase regardless of its overall value, while they can continue to charge a percentage of any credit card purchase, the report said. This means that, in general, debit card purchases make less for payment processors than those on credit cards do.

Consumers may have shied away from credit card use as a means of protecting their overall finances, but they should also take the time to regularly check their credit reports. Doing so may help them identify unfair markings that can take a toll on their credit standing.