The most recent industry data indicate that electronic payments account for 40% of all U.S. transactions and 60% of U.S. dollar flows. Card transactions – debit, credit, and prepaid – make up over 75% of these electronic payments. While cards have continued to increase in usage since their introduction, they are mainly used at the point of sale and account for only 4% of total U.S. dollar flows.

The debit card surpassed the check between 2006 and 2009 to become the most used noncash payment instrument in the U.S. A debit card provides a cardholder electronic access to his or her bank account. The technology to support debit cards, including mag‐stripe cards, ATM machines, and online networks, was created in the 1960’s and 1970’s. Popular acceptance of the debit card boomed in the 1990’s, and by 2005
the number of debit card transactions had eclipsed the number of credit card transactions.

The majority of U.S. debit card transactions are processed as either PIN or signature transactions:

• PIN‐based transaction (online debit): The consumer enters the associated PIN at the point of sale
  terminal. The transaction is routed through a proprietary ATM network.
• Signature‐based transaction (offline debit): The consumer signs for the transaction, which is routed
  through the network maintained by the brander of the card (typically Visa or MasterCard).

The credit card is the only electronic payment type to exhibit a decline in usage in the U.S. from 2006‐09, dropping to 21.6 billion transactions in 2009. The credit card actually predates electronic payments; by the early 1900’s major hotels and department stores issued identification cards to loyal customers entitling them to credit at the issuing stores. Diners Club offered the first general‐purpose charge card in 1949.

Soon thereafter, Bank of America initiated a general purpose credit card program and licensed the credit card to a network of banks. This network became Visa, and the rival network MasterCard formed in 1966.

Today’s general purpose credit cards offer cardholders a revolving line of credit and allow for payments processed in one of two ways depending on the issuer and associated network:

• Closed‐loop systems: Issuers (such as American Express or Discover) capture and process all
  transaction data, authorizing and settling all transactions initiated with cards they issue.
• Open‐loop systems: Banks issue cards branded by a network (such as Visa or MasterCard).Transactions are processed through the branding network’s centralized system similar to signature-based debit card transactions.

The prepaid card is the fastest growing noncash payment form in the U.S. and accounts for 5.6% of U.S transactions. Several prepaid products fit under the umbrella term “prepaid card”:

• General purpose prepaid: The card is branded by a credit card or PIN network. The card is generally
  accepted by any vendor who accepts the branding network’s credit or debit card, and transactions
  are processed over the branded network.
• Private label prepaid: The card is issued by and limited in use to one or several merchants.
• EBT (Electronic Benefit Transfer) prepaid: The card is issued by a firm or government agency and
  used to disburse benefits or payments, such as wages, to a household or individual.

The Clearing House, established in 1853 to bring order to clearing and settlement between banks, is the
nation’s oldest banking association and payments company.