Credit and debit are now tops for some payments

Consumers' attitudes toward spending have been changing significantly in the last few years for a number of reasons, and now credit and debit purchases have surpassed cash as the most common payment method among retailers.

These days, millions of consumers are relying more often on the convenience of credit and debit cards to make purchases, both online and in the real world, and now, these cards are being used more often than cash at brick-and-mortar retailers, according to new data from Javelin Strategy and Research. Currently, debit cards are more frequently used for these purchases than credit cards, perhaps due to the way in which consumers' attitudes toward taking on debt have changed in the last few years, but both payment methods are relatively close in overall volume. It's expected that by 2017, both payment methods should be on equal footing.

Further, it's expected that the total overall share of purchases both debit and credit currently enjoy will continue to grow into the future, particularly as consumers begin to rely more heavily on the burgeoning mobile wallet technologies that will soon be widely available, the report said. In all, the use of these devices just to make retail point of sale purchases is expected to be worth as much as $1.4 billion annually by the end of 2017, up from this year's projected $365 million.

The reason this particular aspect of the retail industry will be important for card issuers going forward is its sheer size, the report said. Currently, the point of sale retail market is worth some $3.8 trillion, and accounts for 94 percent of all purchase volume in the U.S., dwarfing online sales considerably.

Prepaid cards may be driving debit increase
Part of the increase in point of sale purchasing shifting toward credit and debit is that consumers are now relying far more heavily on prepaid cards to make their day-to-day purchases, the report said. These cards may be ideal for consumers who cannot afford traditional bank or credit card accounts but are seeking some amount of payment flexibility that cash does not provide.

"Financial institutions are investing in prepaid cards, which are becoming a more attractive option to consumers," said Beth Robertson, director of payments research at Javelin. "Unlike gift cards, prepaid card features and functionality have evolved to be comparable to traditional demand deposit accounts. Prepaid cards often include features like advanced account management, bill-pay capabilities and a linked savings account, providing consumers with more choices and greater flexibility."

Consumers who want to get a better handle on their finances overall should also order copies of their credit reports. By doing so, they may be able to determine if there are any unfair markings having an adverse effect on their credit ratings. Fortunately, if any of these entries are discovered, working with a credit repair company can get them cleared up relatively quickly.