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Debit card use, which has risen during the economic downturn, will continue growing at the expense of credit card use in the U.S. even after the economy recovers, a new TowerGroup report predicts. TowerGroup is an independent research firm owned by MasterCard Worldwide. Debit card transactions, which accounted for only 1% of noncash transactions 15 years ago, now represents more than half such spending as the recession has driven more consumers to shift everyday spending from credit to debit. In the report "Shuffling the Cards: The Migration of Frugal Consumers and Cautious Lenders to a Debit Card World," TowerGroup research directors Brian Riley and Dennis Moroney contend debit card transaction and spending volume will continue to grow through 2015. While many consumers shifted their spending to debit during the recession to control their debt, cautious credit card issuers also tightened some borrowers' credit limits, driving more consumers to reach first for their debit card. Debit cards are now "top of wallet" in many consumers' minds, a habit that is likely to stick around, the researchers say. Another factor propelling future debit card use is the rise of payroll and other benefits distributed through debit cards, they note. Major banks and card issuers are beginning to use debit cards tied to demand deposit accounts as a primary channel to cross-sell other banking products, including credit cards, the researchers say. And though debit cards dominate in everyday expenditures such as fuel, fast-food and grocery purchases, credit cards still lead in discretionary spending, the report notes. "It is useful to issuers in an era of tighter lending to be able to observe how the customer handles day-to-day banking and then customize credit offerings based on that behavior," the researchers wrote.

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