NEW YORK - As Americans see their home prices plunge, bills climb, and credit lines shrink, they are swiping their credit cards less and their debit cards more - and Visa and MasterCard are still raking in the fees.
Debit card use has been catching up to credit cards for years, but the weak economy has cemented debit as a major US revenue driver for card processors. US credit card use hasn't dropped off, but it is growing at its most anemic pace yet compared to debit.
"Credit card spending in general is much softer" in the United States, said Visa Inc. chief executive Joe Saunders in a conference call with analysts late Wednesday. "It's not down, but it's marginally up, in the low single digits. Our debit card spending, on the other hand, has continued to grow and is very robust."
MasterCard Inc.'s results revealed a similar trend. Within the United States, MasterCard's gross dollar volume on credit and charge cards inched up 0.7 percent during the second quarter - slower than in previous quarters - but gross dollar volume on debit cards soared 15.8 percent.
Some of the disparity is due to people switching from cash and checks to debit, but a good deal of the difference reflects a shift away from credit amid a flagging economy, executives and analysts say.
"The economic environment is pretty tough," said MasterCard chief financial officer Martina Hund-Mejean during a call with analysts yesterday.
What's also appearing to dampen credit card spending is the decision by banks such as JPMorgan Chase & Co. and
Visa's profit rose 41 percent in the April-to-June quarter to $422 million, or 51 cents a share, up from $299 million in the same period a year ago, before the company went public.
MasterCard posted a $747 million loss for the second quarter after taking a $1 billion after-tax charge related to a settlement with