Credit vs. Cash

March 17 -- What's in your wallet?

Among the 185 million card-holding U.S. consumers, the average person carries three bank-issued credit cards, four retail credit cards and one debit card, according to CardWeb.com.

That's a lot of plastic — reflecting an incredibly competitive industry that's becoming even more so.

Over the past year, the credit and debit franchises of Visa USA and MasterCard International have become increasingly threatened by consolidating banks and payment processors, multiple law suits and even themselves. The battleground is getting bigger and nastier.

Over the past few years, credit card issuers have improved rewards and cashback cards. Citibank, a unit of Citigroup, now offers a card that grants 5 percent cashback on everyday purchases at supermarkets, gas stations and retailers. That's almost 400 basis points more than a standard checking account earns in interest.

Even debit cards have joined the rewards game.

Banks are also moving very fast into pre-paid, gift and payroll cards. There are mini-cards for a keychain and wireless card acceptance terminals.

Plastic payments now account for 53 percent of consumer purchases, compared to 43 percent in 1999, according to a survey by the American Bankers Association and Dove Consulting.

For the largest issuers, Citigroup, MBNA and J.P. Morgan Chase cardholders are generating tremendous amounts of purchase volume. Total plastic purchases — either credit or debit — are up 54 percent since 1999.

"Banks are looking for higher revenue out of consumer spending," says Matthew Park, an analyst covering specialty finance for A.G. Edwards.