America is hooked on credit cards — and it's pretty clear why (JPM, TSYS)

The credit card is now the preferred method of payment among Americans, edging out debit cards and cash, according to the 2016 US Payment Study by payment processing company Total Systems Services, or TSYS.

It's the first time credit cards claimed the top spot in the six years TSYS has been conducting the study, which surveys 1,000 consumers who hold at least one debt card and one credit card (you can read more about their methodology on page four of the study).

Why have credit cards grown more popular? The study offers some insights as to why:

Forty percent of respondents from the TSYS study picked credit cards as their favorite form of payment, followed by debit cards (35%), and cash (11%). Credit cards have been gaining on debit cards for several years now.

TSYS found that credit cards aren't universally loved, currying the most favor from older millennials.

Credit card love also skewed toward high-income households. The more money a household earns, the more they prefer credit cards.

So why are credit cards becoming more popular than debit cards, the previous payment champion? The key driver appears to be an increasing attraction to the rewards these cards offer, which card companies have been steadily ramping up in recent years.

TSYS found that rewards are the feature Americans value most in credit cards, followed by attractive interest rates and reasonable finance charges.

This helps explain why high-income households enjoy plastic so much, according to the TSYS report, which said these families are "likely driven by rewards accumulated for those purchases."

Credit card companies have been locked in a battle to secure upper-echelon customers in recent years, doling out increasingly lush sign-up bonuses, travel perks, and cash-back points to win loyalty. Among the six-largest card issuers, spending on rewards has more than doubled since 2010.

Analysis by personal finance website Magnify Money shows that rewards spending jumped from $10.6 billion in 2010 to $22.6 billion in 2016 among the six largest credit card companies, which includes: JPMorgan Chase, American Express, Capital One, Citigroup, Bank of America, and Discover.

JPMorgan's launch of the Chase Sapphire Reserve was the most high-profile salvo in the credit-rewards war. last summer earlier this year

What changed in 2010 to open the floodgates on rewards spending? One reason involves a small legislative amendment in the Dodd-Frank financial reform bill that had the unintended consequence of flipping banks' financial calculus on credit cards vs. debit cards.

The Durbin Amendment — named after Illinois Sen. Richard Durbin — capped how much money banks could charge retailers every time a customer swiped with a debit card to make a purchase. The idea, in part, was that retailers would pass along savings to consumers, though there's debate as to whether that ever happened.

Big banks staunchly opposed the legislation, and there's little debate about what happened next: They took steps to recover the roughly $14 billion a year that the law cost them.

Debit card rewards were slashed, and fees for holding accounts connected to debit cards increased by 3% to 5% on average — including monthly maintenance fees, inactivity fees, and overdraft fees.

"" said Thomas Scanlon, an attorney who specializes in advising companies on regulations for financial services and products.

At the same time, banks started investing heavily in credit cards, which were unaffected by the Durbin Amendment.

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The escalating credit card rewards war has succeeded in winning over customers. But there are some ominous signs that credit card companies may have issued credit too freely.

In the past two fiscal quarters, credit card defaults have spiked, a worrying sign given low unemployment and America's robust economy in general.

And credit cards are now a top concern for the Federal Reserve. The Fed projected in its annual stress tests of banks last week that losses could hit $100 billion if the US entered a severe recession.