Cash Preference Weakens As Younger Consumers Go for Cards, Especially Debit

Industry efforts to persuade consumers to use credit and debit cards for small-ticket purchases may be paying off, at least among younger consumers, finds a survey from CreditCards.com, a card comparison site for consumers.

In the survey of more than 600 U.S. adult credit card holders sampled in early March, 58% prefer cash for transactions of less than $5, down from 65% two years ago. Among consumers 18-to-29 years old, 36% prefer cash, as do 43% of those 30-to-49 years old.

Cash preference increases for older consumers, with 72% of those 50-to-64 years old and 77% of those 65-and-older opting for currency.

Younger consumers are choosing to use debit cards for smaller purchases to a much larger degree than they choose credit cards. Those in the 18-to-29 bracket select debit cards 46% of the time compared with 18% choosing a credit card. In the 30-to-49 age group, 36% choose debit cards and 13% choose credit cards

Older consumers exhibit even less preference for credit cards for small purchases. Just 7% of 50-to-64-year-old consumers choose credit, as do 9% of those 65-and-older. For debit cards, the results are 21% and 10% respectively.

The survey may highlight a weakening of the purported stigma associated with using a payment card for small-ticket purchases, suggests Matt Schulz, senior industry analyst at CreditCards.com. “But now, that’s really gone,” Schulz tells Digital Transactions News. “What we’ve seen in this survey is those folks under 50 have no problem paying with plastic for small purchases.”

He expects that trend to continue because of the increasing use of mobile payments and because younger consumers have grown up using payment cards. “Cash hasn’t necessarily been a part of their lives to a large degree,” he says.

The larger, unanswered, question isn’t if they’ll continue to use cards, but if they will always prefer debit to credit, Schulz says. As they age, he asks, will they shift their spending to credit cards to reap rewards and better security?

“Millennials prefer debit to credit, and it’s completely understandable. A lot of them are saddled with student-loan debt and may have had difficulty finding a job,” he says. “They are leery of anything that could lead them into more debt.”

As for the role of mobile payments in small-ticket purchases, Schulz has no doubt that, once this payment method can be accepted in more locations and more devices with the capability are in consumer hands, it will accelerate. “Mobile will get more and more integrated into our lives from a financial standpoint,” he says. Banks like the technology because of the convenience and security it provides, and retailers like it because of the targeted marketing it affords. “Consumers will grow to like it more because of convenience and it’s more secure than the average person gives it credit for.”