38% of Consumers Used Debit for Their Last In-Store Purchase; Just 23% Did So Online

Payment card preferences continue to align with earnings, determining which kind of plastic millions of consumers reach for when making retail purchases.

PYMNTS explored the topic in the report “Digital Economy Payments: The Ascent of Digital Wallets,” based on surveys of nearly 2,750 U.S. consumers and looking at the credit/debit divide through the earnings and income lens.

Credit and debit cards are still the payment methods of choice for most consumer purchases, however, alternatives like digital wallets and buy now, pay later (BNPL) are taking more share, particularly among those shopping online. PayPal now holds a 13.5% share of spending on retail products but just 2.7% of in-store transactions, for one example.

“Consumers continued to rely on their go-to payment methods — debit and credit cards — for online and in-store retail purchases in the 12 months before December 2022, according to PYMNTS’ Q4 2022 data,” the study stated. “We found that although 38% of consumers used debit cards for their last in-store purchase, just 23% used them online. Digital wallets are responsible for this gap, as they collectively represent a much higher share of online spending than in-store spending.”

As it pertains to a consumer’s income level, debit cards and cash represent more than half of the total amount spent by low-income consumers for all retail purchases, while middle- and high-income consumers are heavy credit card users, paying more than one-third of their retail expenses with this payment method.

In the 12 months before December 2022, “high-income consumers also paid with nontraditional payment methods more often, with PayPal making up 8.5% of all their retail purchases, Apple Pay 3.5% and Google Pay 2.1%,” the study found. “BNPL is more popular among middle-income consumers, who paid for 1.5% of all their retail purchases this way.”

Conversely, debit cards still dominate for everyday essentials such as groceries, leaving little room for alternative payment methods.

“Consumers used debit cards to pay for 43% of in-store grocery retail sales and 40% of online grocery sales in the last 12 months,” according to the study. “Credit cards maintained a 31% share of all grocery retail this quarter, both online and in-store.”