Why Gen Z’s Debit Card Push is Eating Into Credit Card Profits

For people worried about the economy and dealing with affordability issues, one option could be to tuck that high interest rate credit card aside and reach for a trusty debit card instead. It is linked directly to a bank account, and there’s no need to worry about going over a credit limit or paying hefty interest charges each month.

Consumers turn to debit cards in times of economic uncertainty, and that certainly applies to 2026. Some debit card spenders also think using a debit card will help to limit overspending. But be careful about doing heavy spending with a debit card. Spend over a bank balance and there could be expensive overdraft fees to pay.

Watch on

To uncover the latest debit card trends, CardRates recently sat down with Paul Dunning, Vice President of Business Development at Galileo, a fintech firm owned by SoFi. He explained why Gen Z consumers are turning to debit cards and expecting rewards, the compelling case of debit card rewards, and the appeal of debit cards for the debit-first consumer.

Dunning also spoke about what is driving debit card spending, how debit cards are meeting consumer expectations, who wins when consumers turn to debit cards, and how going debit first affects credit building. 

CR: What’s really driving the increased use of debit cards for everyday spending?

PD: For the first time in four years, debit is actually spending at a higher rate than credit. And I think that’s really interesting. I think we’ve also seen just a resurgence of rewards on debit. 

It’s really compelling for the debit consumer to be able to really earn rewards based on the brand they’re with or the rebates that they’re looking for.

CR: Fifteen years ago, we heard that debit rewards were dead. Is that not true?

PD: Debit rewards were alive, then they were dead, and now we’re bringing them back. So we’re super excited about it.

A lot of these debit rewards products were in the market for years past and they were never a primary focus of brands. But with the Durbin Amendment, that all shifted, that all changed. 

CR: Why are Gen Z consumers interested in debit cards?

PD: We’ve done a lot of research on this topic. And I think everything you know about Gen Z is that they are digital first. They are brand seeking. They are looking for high value.

And so if you think about just the life cycle of a consumer with their end financial product, a lot have a primary bank account. A lot of those have either fees or they have triggers needed to maintain no fee or they have no rewards after all of that. 

So I think what we’ve really seen from the younger generation is really the ability to say, ‘Hey, I want more for my spend.’ And we’re having the ability to power that with obviously the support and partnership of some incredible brands that we’re with.

CR: How would you say debit card features are evolving to meet consumer expectations that were traditionally associated with credit cards exclusively?

PD: Think of the life cycle of a credit product. You go through an application flow, you’ve gotten open to buy, you spend, you see rewards. I think debit historically has been one where you’re looking at the ability to say, you go into a branch location, perhaps you sign up online, you set up an ACH or your direct deposit.

If you think through the ability for debit to have a direct deposit switch capability in an app on the fly, a subset of your percentage of direct deposit, are all things that we are certainly supporting today. 

CR: What kind of consumers are leading this shift toward debit-first behavior, and what would you say their primary priorities are?

PD: You’ve got a population across the country that are debit first, debit always. I think those individuals are ones that may be credit averse. They’ve never dabbled into credit. 

What we really are seeing in terms of this propensity is that younger individuals are ones that aren’t ready for credit. They aren’t ready to manage debt. They’re looking for financial wellness. They are looking for some tie to a brand that they love.

The data that we’ve seen from a number of players across our ecosystem is really they want to have a tie to a brand. They want to be really proud of the spend that they have and the ancillary perks that they get from that, whether that be added miles or added rewards or whether that be a credit for a free check bag.

CR: If spend starts to shift more to debit as we’re starting to see, who wins in that arrangement and who loses from a competitive standpoint within financial services? 

PD: One of the things that we see right now is you’ve got the spend on credit and I would say the debit resurgence that we are seeing is not necessarily taking that over. 

I think one thing is certainly you see the interest income from revolve is one thing that consumers want to avoid.

As we partner with a brand to launch debit it’s really all about how can they earn more for their debit spend than they already have with an existing provider.

What we see from brands launching debit is it’s very intentional not to cannibalize their credit book. But certainly as you think through the navigation of different products that we could have from debit to secured credit to fully unsecured, it’s all about trying to meet the consumer where they’re at.

CR:  If more consumers go debit first, what happens to credit building? Does this trend risk leaving some people behind?

PD: With debit and credit building, I think what’s really unique about what we see in place today is with our technology at Galileo, we actually have the ability to have a good secured credit model. What does that mean? You’ve got the ability to have an issuer or a partner that doesn’t take on any liability risk from true credit. 

And then there is some unique technology in the background that really facilitates not only the credit building, but actually a higher interchange rate on a credit bin. We love the partners that we have on our secured credit product. that has absolutely taken off in the last few years and something that we’d love to see take off even further.

CR: Looking ahead, how do you see the role of debit cards evolving in the broader payments ecosystem over the next few years?

PD: There’s so much that can be done on debit. We’re at the early stage. Some things that we kind of think about in terms of next is certainly, how do you facilitate that credit builder, secured credit as a feature functionality of that? 

I think another one is looking at how do you enable not just the end consumer who’s engaging at a younger age, perhaps, or that debit first, but how do you bring on like a parent-teen product, for example.