AUSTIN, Texas -- Whether in picking up a cup of coffee at the convenience store on the way to work or a magazine at the airport, more consumers are using cards instead of cash to pay for small transactions, according to a new CreditCards.com survey.
A national telephone survey of 616 adult U.S. credit cardholders found that about two out of every five consumers will use either a credit card or a debit card for in-person purchases of less than $5: 11% prefer credit cards, 27% debit cards, 58% cash.
When CreditCards.com conducted the same survey two years ago, cash was at 65%.
The reasons behind card use becoming more ubiquitous are fairly simple:
- Cards are convenient. For many, swiping or dipping a plastic card is just easier than paying with cash, especially for busy professionals and families who might not have time to stop by an ATM or fumble with change in the checkout lane.
- Plastic is usually fee-free. Cash can be expensive. ATM fees are common and if consumers aren’t careful, a quick stop for cash could result in a few dollars in fees. While that may not break the bank every once in a while, regular ATM cash withdrawals can add up.
- Cash isn’t protected. If money is stolen from a debit or credit account, there are protections in place to help consumers recover lost funds. Even for small purchases, using a credit card is a particularly safe way to secure money, thanks to the zero-liability fraud protections provided by the major card networks.
- Rewards are an added bonus. Relying on cash for even the smallest of purchases often means forgoing the possibility to earn cash (or points or miles) that so many credit cards--and even some debit cards--offer today.
The anti-cash trend is particularly strong among the young. A majority of those ages 18 to 29 now prefer paying for small purchases with credit or debit, and only 36% will pay with cash.
Younger consumers prefer plastic, with 64% of millennials (18- to 29-year olds) saying they use a debit or credit card when making small purchases. Only 19% of those 65 and older do so.
College graduates are more likely to use cards for small purchases. A combined 44% of those with college degrees prefer debit cards (28%) or credit cards (16%) over cash. Only 21% of those who have not attended college use debit cards for purchases of less than $5, and only 7% use credit cards.
The less-affluent and the unemployed rely on cash, the report said. Cash is preferred by 63% of those with incomes under $50,000. Those with incomes of $75,000 or greater use cash only 49% of the time. Unemployed consumers also favor cash: Sixty-nine percent of unemployed respondents said they use cash for purchases under $5, compared to 52% of those employed.
Age is the biggest predictor in whether someone prefers cash or cards for small-dollar purchases. Austin, Texas-based CreditCards.com found young consumers are the least likely group to hand a cashier a $5 bill to pay for a cup of coffee. In fact, those 18 to 29 are the only age group in which a majority prefers cards to cash. They're particularly fond of debit cards, which are used by 46%.
That makes young adults nearly five times more likely to pay for a small item with a debit card than someone 65 or older.
Those 18 to 29 are least likely to have a credit card, but those who have them use them. They're twice as likely to pay for a small item with a credit card than those 65 and above--18% vs. 9%.
Overall, young adults prefer plastic for small transactions because they are just accustomed to swiping a card or paying online, not pulling out cash and coins.
The older the consumer, the more likely cash is used to pay for small-value transactions.
Middle-aged people--30- to 49-year-olds in this survey--are almost evenly divided when it comes to how they pay for small purchases: Forty-nine percent favor plastic and 43% favor cash. However, among consumers older than 50, cash becomes the preferred payment method. The preference for cash jumps to 72% for 50- to 64-year-olds and to 77% for those 65 and above.
While most survey respondents said they’d use cash to pay for a purchase under $5, the portion of people favoring cash is decreasing.
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