The news: Among consumers making $25 per hour or less, 43% said debit was their most-used method to make payments over the last three months, per a PYMNTS Intelligence report.

Similarly, 41% of workers earning more than $25 an hour cited debit cards as their main means of payment. 

However, income level is a differentiator when it comes to credit use: 30% of higher earners prefer credit cards as their most used method for payments, compared with only 16% of lower earners.

Why this matters: Consumers’ payment preferences shift depending on how much they make. For lower-income consumers, the perceived safety of a debit card—not being able to spend more than what’s in their checking account—can act as a hard budget constraint. 

That’s also reflected in their other payment preferences: 12% said cash was their preferred payment, while 10% and 5% said the same for PayPal and Cash App, respectively—higher shares than for those making more than $25 an hour.

Better-off shoppers, however, lean into credit cards’ advantages: cash back, points, and card-linked offers. By comparison, 20% of labor economy earners had not used a credit card in the last year, versus 8% of higher-wage earners.

Implication for issuers: Lower-wage earners are credit averse—but fintechs are winning them over with small-dollar loans and flexible terms. That could cost issuers when these consumers start looking for bigger loans like personal or auto loans. 

To compete for debit-forward customers, issuers should consider juicing debit rewards to combat the moves fintechs have made in the space. Once these consumers are in their ecosystem, banks need to show them the value of incumbent financial relationships through card-linked installments and other products. 

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