Cardholders Prefer Debit as Credit-Card Use Falls

For the first time the total payment volume of debit cards in this country surpassed credit-card volume. As this article from Bloomberg.com explains, this trend will continue in 2010 as more taxpayers are trying to avoid incurring more debt. Considering the way of our economy at present, I think it absolutely great that people are being more conscientious about incurring more debt!

At San Francisco-based Visa Inc., the world’s biggest payments network, the total payment volume for debit cards increased by 7.9 percent in 2009 to $883 billion as credit-card volume declined by 7.3 percent to $764 billion. Volume for debit cards at No. 2 MasterCard Inc. in Purchase, New York, rose by 5.8 percent and 2.8 percent at No. 4 Riverwoods, Illinois-based Discover Financial Services.

“Consumers are turning from one form of plastic to another,” said James Van Dyke, President and Founder of Javelin. “Credit cards are falling out of favor as cardholders become more cautious and look for more conservative payment methods.”

Fifty-six percent of consumers said they had used a credit card in the past month compared with 87 percent who said they had in 2007, according to the study, which surveyed 3,294 people in November 2009 for that question. Other findings were based on data collected online from 5,211 respondents in March 2010 and 5,000 consumers in November 2009. If the rate of decline continues, 45 percent of consumers will reach for a credit card in 2010, the study said.

Continue reading at Bloomberg.com…

Your Card Has Been Declined, Just as You Wanted

If you are one of those people who just cannot seem to stay within your monthly budget, you might want to look into the new personal finance tools Citigroup plans to begin offering customers. They intend to offer a feature that will allow customers to set budgets for themselves, and have their card decline purchases that would put them over budget.

The service, called inControl and already in use by some Barclaycard holders in Britain, is a sort of financial chastity belt that offers the potential to prevent a variety of budget sins and other money traps.

Worried about your restaurant habit? If your bank adopts MasterCard’s service, you could tell it to have your debit or credit card reject any restaurant purchase above whatever monthly cap you set.

Sick of your credit card number falling into the hands of thieves? Tell your card issuer to never allow charges originating from the fraud-prone countries that end in “stan” or “ia.” (Don’t worry: You can instruct your bank to make an exception for Australia during the few weeks that you’ll be honeymooning in Sydney.)

Continue reading at NY Times.com…

IRS: Credit, Debit Fees On Tax Payments Are Deductible

From the WallStreetJournal:

Taxpayers who used a credit or debit card to pay taxes last year may be eligible for an additional deduction on their 2008 return, the IRS announced Tuesday.

In a reversal of a previous position, the IRS said fees that credit or debit card processors charge on electronic income tax payments would be deductible as a miscellaneous expense, for those who itemize deductions.

The fees vary, but average 2.5% of the tax payment, the IRS said in a news release. Those fees are charged directly by the card payment processor to the taxpayer, because federal law bars the IRS from paying fees associated with the transactions.

Not everyone who pays taxes using a credit card or debit card will benefit.

First, only those who itemize may benefit from the deduction. Second, the value of miscellaneous deductions, including the credit card fees and other items such as unreimbursed employee expenses and tax preparation fees, are deductible only to the extent they exceed 2% of adjusted gross income.

Other examples of miscellaneous deductions that count toward the 2% AGI threshold include union dues, safe deposit box fees and legal fees.

"By itself, the credit-and-debit fees deduction alone won't be enough to get anyone past the 2% threshold," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. "But for someone who has other miscellaneous deductions, it could be a nice benefit."

Taxpayers who use a credit or debit card this year to pay taxes must wait to deduct the fees on their 2009 income tax return, due April 15, 2010. Those who used a payment card to pay taxes last year have until next Wednesday, April 15, to determine whether they are eligible for an additional deduction.

Most individuals pay their taxes by check. More than 4 million taxpayers paid taxes electronically, the IRS said. That figure includes not only those who paid by credit or debit card, but also those who paid by direct debit from their bank account, which is not generally subject to a fee.