Debit cards are set to become the most popular form of payment by the end of the year, as it saves consumers from clocking up debt, a report says.

Consumers have increasingly turned to debit cards as their preferred payment method, shunning credit cards whenever possible due to hefty surcharges and reluctance to go further into debt in tough economic times.

The report by banking research firm East & Partners found 28.9 per cent of all merchant sales were paid with a debit card in the six months to June, up from about 24 per cent in the previous six months.

East & Partners financial markets analyst Zoran Knezevic said after a gradual shift towards debit cards over the past few years, the pace had accelerated quite rapidly over the past six months.

Mr Knezevic said debit cards would become the most common form of payment by the end of the year should that pace be maintained.

“If this current trend that we’ve seen over the past six months were to continue for the rest of the year, that would be the case,” Mr Knezevic said on Friday.

Mr Knezevic said the move away from credit card debt was in line with what was happening overseas, with debit cards already the most popular form of payment in the UK.

Mr Knezevic said a global recession and prospect of rising unemployment made Australian consumers more “debt averse”.

“Traditionally, Australians have a pretty healthy appetite for debt, but in the current climate that is slightly more muted,” Mr Knezevic said.

“More than anything, it is consumer confidence and unemployment that is flavouring this behaviour.”

Mr Knezevic said the ability to use debit cards for online purchases had also become a major selling point for shoppers.

The value of purchases made with Visa and MasterCard debit cards - known as Scheme Debit - jumped by 37.5 per cent over the past six months, the report found.

“It’s almost a direct substitute for a credit card,” Mr Knezevic said of Scheme Debit cards.

Another factor supporting the use of debit cards was the additional charges that credit cards users faced with when making purchases.

The Reserve Bank of Australia (RBA) lifted restrictions on merchants directly recouping the cost accepting credit cards from customers in 2002.

RBA statistics showed merchants fees for credit card transactions, as a percentage of the purchase price, were 0.88 per cent for Bankcard, Visa and MasterCard in the March quarter.

It was 2.01 per cent for American Express and 2.07 per cent for Diners Club cards.

“Credit card surcharging is gathering pace,” Mr Knezevic said.

“We’re seeing now at the top end of town - among top 500 merchants - 34 per cent are surcharging, which is quite a big figure.”

Mr Knezevic said transaction fees paid by merchants for accepting debit cards were considerably lower.

The six-monthly survey interviewed 2277 Australian merchants with annual turnover of at least $1 million. About 60 per cent were from the retail sector.

AAP