A Brief Overview of the Debit Card

As we’ve covered in earlier pieces, the credit card has been a part of the collective American consciousness since the 50s. Debit cards, although ubiquitous now, are a bit more recent – let’s take a look at their rise to prominence.

If you’re under a certain age…let’s just say 30 as a rough estimate…odds are good that the amount of times you’ve actually gone inside of a bank and spoken with a teller to withdraw money from your checking account are pretty low. Possibly even zero.

Also low is the amount of paper checks you write in a month…again, possibly even zero. That’s because those of us in that age group have grown up having and being comfortable with a debit card. Much like a credit card, a debit card is a 16-digit plastic card that many of us use on a daily basis – the only difference is the funds you can withdraw are directly related to the funds currently in your checking account.

While credit cards have been around for decades, debit cards are a more recent staple of the average American’s purse or wallet. Let’s take a quick look into their history, how they’ve changed our daily lives, and what the future holds.

Brief History

Although it may sound odd, the first debit card (at least in a rough sense of how we view them today), dates back nearly 50 years to the 1960s, according to Marketplace. The nitty-gritty dates are a bit unclear and would take enough space to merit its own article, so we’ll just cover the broad strokes. The Bank of Delaware is credited with pioneering the first true debit card in 1966, and not too far afterward (in 1969 to be precise), the first ever Automated Teller Machine (ATM) was created and introduced here in the states.

More and more banks began implementing both the debit card and the ATM, but it was only on a localized basis and only to their best customers who had a large savings account and a long history of good standing with the bank. This was because in their infancy, debit cards did not withdraw immediately from the checking funds and worked more like a credit card. The technology simply wasn’t there.

It wasn’t until the 1980s, once interbank networks began to gain hold and both MasterCard and Visa bought stake in them, that debit cards truly started to gain a foothold. That, coupled with the explosion of ATM machines nationwide and the development of technology to debit directly/instantly from the user’s checking account, were the big reasons for the debit card’s growth. And grow they did. In less than a decade (1998), debit card transactions began to outnumber paper check transactions, and the gap between them is widening exponentially each year.

How they Changed the World

Going back to our introduction with young people in mind, it’s estimated that about 20% of millennials have never written a check, which sounds crazy to anyone born before 1985 but is easy to see why. Many Americans, regardless of age, have switched to online bill paying. It saves money for both the payer (no stamps) and the payee (significantly reduced paper and postage costs), it’s better for the environment (much less paper used so less trees chopped down, and less fossil fuel used to deliver statements and bills), and saves time (you eliminate time spent balancing your checkbook, and companies eliminate time spent opening mail, separating checks from statements, etc.).

Younger people are understandably more comfortable using the Internet and technology to pay their bills with their debit card, so check usage is on the decline…but what about cash? As we’ve covered before, we are living in an increasingly cash-less world, and that’s no more readily apparent than with younger men and women. According to a recent study by the Independent Community Bankers of America, about 25% of millennials carry less than $5 cash on them each day. A big part of that is because for many younger folks, carrying cash is seen more as a risk than a safety net. While older Americans needed to always have cash on hand in case of an emergency, it’s getting harder and harder to find a place that doesn’t accept debit/credit cards, so that notion is becoming more outdated by the day. And what if you lose your wallet or purse? Any cash you had in it will likely be gone forever, whereas a debit card can be reported lost or stolen almost immediately and whoever got their hands on it would need to know your secret PIN to get any cash from you.

What’s Next

Due to their high saturation point around the world, the debit card isn’t going anywhere. We’ll undoubtedly see more of the Chip-and-PIN/Chip-and-Signature style cards in the near future, with them being all but ubiquitous by October 2017. Some firmly believe that even the more secure chip-style cards won’t be around for long, with more secure biometric options like fingerprint or retinal scanning will replace entering PINs and/or signatures in the not too distant future. The reward programs surrounding debit cards will likely change vastly as well, including tailoring the type of rewards based on user input on social media.

Regardless, the debit card as we know it is here to stay, and as such, will continue to be a valuable part of any business. Valued Merchant Services guarantees that we can reduce your company’s processing fees for debit and credit cards, or we will give you $500. Learn more.

By Chris Del Grande

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