Credit cards have been around for a little more than 70 years. Recently, financial professionals have created smart cards and even more recently debit cards (in the 1970s). You will see a lot of people using both credit and debit cards during special occasions or a holiday season. Plastic flies everywhere!

     Why? Because it's convenient. More and more people are becoming tired of writing checks. They have to take the time to make sure they fill out a check carefully and completely for it to be valid. Usually the person accepting the check will ask for one or more pieces of identification to make sure you are the owner of the checking account. All of that takes time. We are becoming less and less patient and want to do things as quickly as we can.

     So now we can go to a check out line, have our items scanned into the register and "swipe our card" through a "reader" machine, punch in an identification number or PIN, grab our goods and dash off to the next store.

     How do they work? In the case of both credit and debit cards, there is a black stripe on the back of the card. There are electronic signals in that stripe. They tell the reader your name, the name of your bank and the number of the checking or savings account, which is linked to the numbers on the front of the card. You swipe that card; the device reads the numbers and sends a signal to the bank. Within seconds, the computer system tells the reader if it's the right account for you and if there is enough money in it to pay for the purchase you want to make. If there is enough, it pulls that much money from your account and sends it to the account of the store where you are buying things. What could be easier? You are done and by the time you can drive a few blocks home, you can get onto the Internet at your home and your bank's website will show that you spent money. Many times it will say where you spent it.

     People want that convenience. During the first two weeks of fall shopping in 2004, clothing retailers rang up sales of $720 million, accepting debit cards. That's a 26 percent increase over 2003! During the winter holidays, nearly a third of the sales will be done with debit cards. Debit spending in 2002 reached $441 million. In 2003 it reached $570 million!!

     People are now using debit cards more than credit cards and both more than traditional paper checks. During 2003, Americans made more payments electronically than with paper checks.

     According to research recently released by the Federal Reserve Bank, 2003 is the first year electronic transactions were more than paper payments. This study indicated the number of electronic transactions, including debit and credit cards and direct debits, increased 13.2 percent in 2003 to 44.5 billion. Check payments slipped 4.3 percent to 36.7 billion.

     Debit card use grew the most from 2002, rising 23.5 percent to 15.6 billion transactions.

     Richard Oliver, senior vice president of the Federal Reserve Bank of Atlanta said, "The balance has shifted from check writing to electronic payments, and we expect the trend to continue."

     Richard Yamarone, economist at Argus Research, said "It's all about convenience. No longer do consumers want to write checks with two forms of identification. It's just too cumbersome. It's so much easier to swipe and sign."

Did You Know?

In 2003, the 44.5 billion electronic payments had a dollar value of $27.4 trillion.