(Bruce Sutherland/FLICKR)

BY DEB WEINSTEIN-MEDILL NEWS SERVICE

The latest on the credit crunch: Consumers are increasingly leaning on debit cards as opposed to banking on credit, according to a piece in the Wall Street Journal.

For San Francisco-based Visa Inc., this shift translates into a [...]]]>

(Bruce Sutherland/FLICKR)

BY DEB WEINSTEIN-MEDILL NEWS SERVICE

The latest on the credit crunch: Consumers are increasingly leaning on debit cards as opposed to banking on credit, according to a piece in the Wall Street Journal.

For San Francisco-based Visa Inc., this shift translates into a 7 percent spike, to $206 billion, in debit card use in the U.S., for the quarter ended March 31, compared with the same period a year ago. On the flip side, Visa’s U.S. credit card traffic shrank 4 percent, to $203 billion, compared with $218 billion for the same period last year.

The Journal notes that Purchase, NY’s, MasterCard Inc., is experiencing a similar change: Debit card transactions rose 13 percent last year and credit card use fell 2.2 percent.

But what does this mean?

The latest data from financial advice site FeedthePig.org indicates an average 125,000 visits per month, and Mint.com, which helps members track their cash flow, said it has garnered over 1 million users since its March 2007 launch.

Mint’s CEO and founder Aaron Patzer said an internal survey from March indicated two-thirds of its users have changed their spending habits, and are trying to cut expenses by limiting expenditures on activities such as eating out.

What cutting back means, however, depends on whom you ask.

Tina Santos, 40, of Chicago’s Lakeview neighborhood said she started cutting back on costs before Christmas. “I’m learning to cook,” she said, and added that she purchases only essentials.

Friends Wendy Bednarz, 24, and Alison Teevan, 23, on the other hand, said they haven’t reduced their extracurricular spending, although Teevan admitted looking for bargains when grocery shopping.

Adjunct Economics Professor Evan Woods of Occidental College in Los Angeles said changes in spending are cosmetic. “People are downgrading now for a time,” he said, but said the cutbacks are prompted by lower or altered incomes as opposed to a newfound frugality. According to Woods, people spend based on incentives. In other words, should easy credit resurface, so will previous habits.

“Unless you have a pronounced downturn [like the Great Depression]” he said, “[you're] not going to see big change.”