Why are debit cards so popular?

To paraphrase Jerry Seinfeld, “What’s the deal with debit cards?”

Debit cards occupy one of the more boring corners of the financial world. We’re talking about a plain vanilla payment method invented almost 60 years ago. The customer pays with a card and the money comes out of their linked checking account right away. Rewards and other perks are slim to none. Not that exciting, right?

Yet debit cards are projected to be the most popular payment method this holiday shopping season, Bankrate’s 2025 Early Holiday Shopping Survey reveals. And in the first half of 2025, debit card spending grew faster than credit card spending for the first time in years, according to a Wall Street Journal analysis of Visa and Mastercard data.

How Americans are using debit cards

According to that Wall Street Journal article, “U.S. debit-card spending — which typically accounts for a little more than half of all card payments — rose 6.57 percent from a year earlier [in the first half of 2025]. Credit-card spending, by comparison, rose 5.65 percent.”

About six in 10 holiday shoppers (61 percent) plan to use a debit card for at least some of their purchases, the aforementioned Bankrate survey found. That’s ahead of credit cards (57 percent), cash (49 percent), buy now, pay later services (12 percent), checks (5 percent) and some other method (3 percent).

Gen Z shoppers (18-28 year-olds) are the most likely to use debit cards; 70 percent plan to use them this holiday season. On the other hand, baby boomers (61-79 year-olds) are the most likely to favor credit cards (62 percent plan to pay with credit at least some of the time this holiday season). So why are debit cards so popular?

The advantages of debit cards

While debit and credit cards are used in similar ways — to make cashless payments either in-store or online — there are key differences. When you pay with a debit card, you’re spending money you already have in your checking account. It’s deducted immediately, and you’re not borrowing from the bank. A credit card, meanwhile, is a debt instrument. You can usually avoid interest on purchases by paying your statement balance in full each month, but if you carry a balance on a credit card, you’ll probably be charged a hefty interest rate. The average credit card APR is a near-record 20.12 percent. Therefore, if you already have credit card debt, or if you’re afraid you will fall into credit card debt, paying with a debit card can make sense.

Access to credit (or lack thereof) may be another prominent reason many people (especially young adults) gravitate to debit cards. Bankrate’s July 2025 Credit Card Debt Report found that only 57 percent of Gen Zers have credit cards, compared with 72 percent of millennials (ages 29-44), 72 percent of Gen Xers (ages 45-60) and 84 percent of boomers. Some of this could be by choice; many young adults are saddled with student debt and worried about accumulating more debt. And some could be chalked up to industry factors like regulatory developments such as the CARD Act, which made it harder to get a credit card before age 21, and lender decisions to pull back on credit issuance because of economic uncertainty.

Credit cards are often a better choice, however

But for most people, the best payment method is to use a credit card like a debit card. That is, pay in full to avoid interest, thereby avoiding the biggest drawback of credit cards while still having access to their many benefits. Those benefits could include the opportunity to build a strong credit score along with superior rewards programs and — depending on the card — other persk ranging from airport lounge access to travel insurance, purchase protection, extended warranties.

Just over half (54 percent) of credit cardholders pay their bills in full each month, according to our latest credit card debt report. These customers are in a great place to get ahead using credit cards. For instance, I’m on track to earn about $3,000 in credit card rewards this year without paying a cent in interest.

Avoiding credit card debt is a legitimate reason to use debit over credit, but I still don’t totally get it. If you’re using a debit card, you have the money. It comes out of your checking account right away.

So if you’re using a debit card at the grocery store, for instance, why not use a credit card like the Blue Cash Preferred® Card from American Express? It awards 6 percent cash back at U.S. supermarkets (up to $6,000 in annual spending, then 1 percent back after that). Groceries are a necessary expense for every household. Just spend what you would have spent anyway, pay the card off right away and you’ve effectively lowered your supermarket bill by 6 percent (note that the card charges a $0 intro annual fee for the first year, then $95, but even if you only use this card at the supermarket, the rewards surpass the annual fee once you spend about $1,600 in a year).

That’s just one example, of course. You could lean into a different spending category or categories (if you spend a lot on travel, dining out or something else). Or even just keep it really simple and get 2 percent back on everything you buy with one of the best flat-rate cash back credit cards.

I only use my debit card in very specific situations, such as when paying with a credit card would be more expensive (for instance, because a merchant tacked on a credit card surcharge or a sports betting deposit would trigger a cash advance fee). I use cash sparingly as well, but a couple times a year I use my debit card to avoid out-of-network ATM fees by getting cash back at the point of sale.

The bottom line

Your strategy doesn’t have to be all or nothing. While I’m a big fan of putting all of my expenses on credit cards to earn the rewards, you could be selective about it. If the best way for you to avoid overspending and interest is to stick to debit cards and cash, that’s okay. But I still see the benefits of using credit cards for at least some purchases to strengthen your credit score, earn rewards and take advantate of other benefits.

Have a question about credit cards? E-mail me at [email protected] and I’d be happy to help.