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Cash vs. Credit Card Spending Statistics
(Updated September 2020)
How are American consumers spending their money these days? We’re not talking about where they spend their money, or what they are spending their money on. We’re talking about the payment method consumers are reaching for when they go to pay for something. Do they prefer to use cash or do they use cards?
The most recent U.S. Consumer Payment Study done by TSYS in 2018 gives us insight on the trends of preferred payment method. According to these numbers, debit cards remain the top payment choice, cash is increasing as a preferred method while credit cards are decreasing. It’s important to note that payments made with cash tend to be of lower value. If we look at credit card debt statistics, we can see that credit card debt continues to climb as the revolving debt in the US has surpassed $1.03 trillion.
So what payment method do most consumers use to make purchases, cash or card? The answer is both. Most purchases are made with debit cards, and then credit cards. An industry survey found that most consumers fall in the middle of the spectrum and use a variety of payment methods, and so 88% of consumers will use cash occasionally. Nearly 90% of people will use a card payment at least sometimes.
Cash or Credit?
While cash remains a popular payment method, American consumers are using it less and less. Statistics show that compared to 10 years ago, 73% of American consumers are using cash less often. According to an industry survey, only 10% of customers use cash on every purchase and 12% of people never use cash.
Use of Cash
Money Magazine did a survey and asked how much cash people tend to carry. Most people carry less than $40, and only 11% of people carry $200 or more. Men are the least likely group to carry cash as only 16% of men report carrying cash.
For the lower value purchases, most consumers typically use cash rather than a credit card. According to a study done by the US Federal Reserve, the results show that cash is used for about 49% of transactions valued under $10. 42% of purchases that are $25 or under are also made with cash.
Another study done by the Federal Reserve asked survey respondents how they would typically make a $10 purchase reveals that debit cards and cash are almost equal when it comes to making a small purchase.
Who uses cash the most?
Individuals under the age of 25 are the majority of people that use cash, followed by those in the 65+ range. Lower income families also tend to use cash more often than those with higher incomes.
Use of Credit Cards
Most people have some sort of credit card. There are 340 million active credit cards in the US. 51% of Americans have 2 or more credit cards and 13% of Americans have more than 10 credit cards. Store brand credit cards are by far the most popular type of credit card out there, which could account for consumers having multiple lines of credit.
Consumers also tend to spend more when paying with credit. While this may be good for businesses, 44% of Americans have revolving credit card debt - meaning they carry a balance from month to month.
Using cards to pay doesn’t seem to be slowing down. According to the Federal Reserve, from 2016-2017, the number of card payments increased by 10.1% and the value of the transaction increased 8.4%
In a recent survey, customers were asked how likely they would use a credit card depending on the purchase type. Most people prefer to use debit cards overall, but 48% of customers are likely to use credit cards for online shopping. Only 6% would use credit cards to make payments to individuals, preferring to use cash or person-to-person payment options like paypal, venmo & zelle.
What are the advantages to cash over credit cards?
Using cash does have its advantages. If you’re trying to save money and are learning how to manage a budget, then using cash might help you spend less.The average credit or debit card purchase is at $112, while the average cash purchase is just $22. You might think twice about extra purchases when you can physically see the cash dwindling & leaving your hand.
And while using a credit card for bigger purchases can make sense if you’re worried about carrying a large amount of cash around, most people tend to spend more than they would if they were paying cash on everyday purchases. Consumers will spend 83% more on credit cards than they do with cash.
Using cash decreases the risk of having your identity stolen. Identity theft is a growing concern in America and worldwide. In 2018, 14.4 million Americans had their identity stolen, amounting to a total of $1.7 Billion.
Paying with cash also finalizes the purchase process. There’s no debt or interest that can accumulate like with a credit card. There won’t be a bill to pay in a month for the purchase that you are making today.
So while paying with cash may be more uncomfortable, it’s short term compared to the discomfort of financial strain. Credit card debt is a growing problem in America, and at the time of this writing, the average credit card debt is $6028.
Are there advantages to using credit cards over cash?
Convenience and safety are two of the main reasons people use credit cards. 70% of customers prefer to make purchases using a card rather than cash. There is no wad of cash to carry around or change to worry about. If a wallet gets stolen, people can notify their credit card company so they will not lose that money and have little to no liability. If cash gets stolen, it’s gone.
To offset the risk of fraud and identity theft, most credit cards are embedded with EMV chip technology. In fact, EMV chip credit cards are the most popular type of credit cards.
Using credit cards can help build a positive credit history, and combined with good money management, will help build a better credit score. A better credit score means better interest rates on mortgages and auto loan financing.
Some can safely use their credit card to gain points, rewards and airline miles because they have the cash in their bank and can pay off the balance immediately. However, continuing to make purchases on a credit card and spending money that you don’t have can get you into financial trouble quickly. In fact, only 51% of Americans use saved cash to make their holiday purchases.
Are we moving to a cashless society?
With many aspects of life, including banking, moving to the digital realm, only 45% of the transactions in the United States are considered “non-cash.” A very low percentage of people use no cash at all. According to a survey done by Money Magazine, only 19% of their respondents hadn’t made a cash purchase in the past month.
Over half of the transactions in the United States are considered cash transactions, and that isn’t going anywhere anytime soon. Here’s how we compare to other countries in terms of our non-cash transactions.
Cash vs. Credit Card payments during covid outbreak
The concern these days here in the US during the outbreak of Covid-19, a.k.a. Coronavirus is how to slow the virus from spreading and wreaking more havoc.
Despite some claims that it’s best to use contactless payments or credit cards instead of cash, it doesn’t really stop the spread of the virus. It’s really about what you touch!
So if you’re in a store and touch an item that has been contaminated with COVID (or any other illness for that matter) without washing your hands, you could be a carrier for the virus. So then, anything you touch with a virus on your hands could become contaminated.
This means that when you reach for your credit card or mobile wallet, the virus is still living on your cell phone or credit card, wallet, purse, cart, keys, purchased items and any number of other things. Any one of these could be the source of transmission, so using a credit card instead of cash wouldn’t necessarily prevent you from getting a virus. It could spread it to others who touch the cash, but so could touching the keypad at the checkout, or putting items into your cart.
Some businesses are opting for touchless credit card readers to limit contact and to help curb the spread of the virus. However, the best way to prevent the spread of illness is by thorough hand washing with soap and water for at least 20 seconds.
Cash vs. credit card spending Statistics
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