Zoom out

[Dave Birch] I’m sitting working at home, going through some slides for a conference that I have to have finished shortly, and I’m listening to the radio. An airline called Zoom has gone bankrupt and, once again, the news report points out that people who paid with credit cards will get a refund, people who paid with debit cards and cheques will not. They’ve just interviewed a woman (on BBC radio) who paid UKP1600 (ie, $3,000) for tickets with a debit card and will now not get her money back. I feel sorry for her, obviously, but I just don’t get it: why does anyone ever pay for anything using a debit card? There’s no frequent flyer miles, no cashback (in the U.K.) and no legal protection, yet debit volumes keep on climbing: there were about two billion credit card payments in the U.K. last year but about five billion debit card payments.

There’s an enormous amount of consumer money at risk when you look at things this way. Card spending is about a third of total U.K. consumer spending:

The GBP 354 billion spent on plastic cards during 2007 represents 31 percent of total consumer spending in the UK, with the remaining GBP 771 billion made up of cash, automated payments and cheques.

[From Payment News and Industry Social Networking – 2008 – Debit cards preferred for payments in UK during 2007- report]

Now that debit cards dominate card spending, there’s a couple of hundred billion that the credit card industry (and new competitors) could be doing a lot more to win back and perhaps this security/fraud route might be one way. It seems to me that, as an informed consumer, I don’t much care if my credit card gets ripped off because I’ll get the money back (and, in particular, I’ll get to see the statement before any money goes from my bank account). But if my debit card gets ripped off, then it’s my money that disappears right away and it may take me a while to get it back even if I am entitled to it. This is why I don’t even use my debit card in stores for small transactions, especially now that criminals are targeting POS terminals as the weak link in the chain and not just in the U.K…

Thieves may have swapped a debit-card-reading machine at one or more of the store’s checkout stands

[From Payments News: Debit Card Scams Hit Shoppers in Silicon Valley – May 03, 2008]]

I asked on Twitter (I’m “dgwbirch”, by the way, if you’re keen to follow someone with a life less interesting than yours) and victoriajane said that she thinks it’s a control issue, because psychologically people feel more in control of debit spending and I remember being told something similar on a recent project. The issue was that when people use debit cards then when they go to an ATM to get some money they see how much money they really have, if you see what I mean, whereas they forget money spent on credit cards. I’m sure these views are correct, but I will continue to use my debit card at ATMs only (until I start getting Nectar points or something, naturally!) and use my splendid Barclaycard OnePulse credit card everywhere else.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]