The younger you are, the more likely you are to prefer debit or credit cards for payments of under $5, a new CreditCards.com poll shows.
A cup of coffee. A pack of chewing gum. A newspaper at the airport. For even the smallest, most casual purchase, credit cards and debit cards are replacing cash as the preferred form of payment, according to a new survey by CreditCards.com.
The national telephone survey of 983 adult U.S. credit card holders found that 1 in 3 usually uses a credit card or a debit card for in-person purchases of less than $5. The breakdown: 11 percent prefer credit cards, 22 percent debit cards, 65 percent cash.
But the generational divide is striking. A slight majority (51 percent) of consumers 18-29 prefer plastic to cash, the only age group to do so. A preference for cash becomes stronger in each advancing age bracket, until at age 65-plus, 82 percent prefer cash.
The CreditCards.com survey, conducted by land line and cellphone, found that:
- The casual use of plastic is moving steadily through age brackets — and already has a firm grip not only on millennials but also increasingly on Gen Xers. Crunched another way, the data show that if you’re 49 or younger, you’re almost as likely to pay for a $5 purchase with plastic as you are to pay with cash — 52 percent prefer cash, 46 percent prefer debit or credit cards. For now, if you’re 50 or older, you’re still somewhat unlikely to pay for a $5 purchase with plastic — 77 percent still prefer cash, with 21 percent reaching for debit cards or credit cards.
- Those who graduated from or attended college are significantly more comfortable than others with using plastic for small purchases. A combined 39 percent of those with college degrees prefer debit cards (21 percent) or credit cards (18 percent) over cash (59 percent). Only 16 percent of those who have not attended college usually use debit cards for purchases of less than $5, along with only 6 percent who prefer credit cards for that purpose.
- Income doesn’t seem to be much of a differentiator, except for those near the bottom of the scale. A combined 38 percent of those making $75,000 or more preferred plastic for small purchases, compared with 43 percent of those making $50,000 to $74,900, 32 percent of those earning $30,000 to $49,900, and only 23 percent of those making less than $30,000.
- Credit cards and debit cards are used more frequently for small purchases by those employed full time (42 percent) or part time (34 percent) than for the unemployed (23 percent). People with children are more likely to use the cards for small purchases (41 percent) than those without children (30 percent), perhaps because parents have less time to wait around for change.
- Politically, we’ve finally found something on which we all can agree. Thirty percent of Democrats and a nearly identical 28 percent of Republicans favor credit cards or debit cards rather than cash for small purchases. Interestingly, those describing themselves as politically independent also were more independent from cash — 40 percent of them prefer plastic for such transactions.
In all cases, however, the trend is clear. Regardless of some differences in magnitude based on demographic factors, plastic is replacing cash as the currency of choice — even for small purchases.
“I believe plastic use will increase for small purchases, both for debit and credit cards,” said Martin Lynch, director of education of the Cambridge Credit Counseling Corp. of Massachusetts.
Why the shift to cards
The reasons are many: Technological advancements at the point of sale have made it just as fast to pay by plastic as by cash. Rewards have become a common feature of credit cards, with two out of three credit cards offering rewards, encouraging rewards chasing. Debit cards, with their balances available instantly and online, have largely replaced paper checks and tedious manual records. And financial institutions have spent decades persuading consumers to use and merchants to accept cards universally.
“I’ve been moving away from cash and moving toward using my cards for even small purchases,” said Larry Pintacuda, 67, a retired state government administrator from Florida. “Why keep going to the bank and then carry cash if you don’t have to?”
Small purchases represent particularly appropriate uses of a debit card, Lynch said, assuming you don’t get carried away and overdraw the card-linked bank account.
“Debit cards are everywhere already,” he said, “but because their use can’t be reported to the credit bureaus and, thus, they don’t build credit, they should only be used as a matter of convenience.”
People who frequently use credit cards for small, casual purchases also could overdo it, but probably not to a great degree.
“It would take a lot of lattes to send someone into credit counseling or bankruptcy court,” said Melinda Opperman, senior vice president of community outreach at Springboard Nonprofit Consumer Credit Management Inc., a nationwide credit counseling organization.
“In truth, we like the idea of using credit cards frequently for small, manageable expenses,” she said. “This gives users the benefit of an active credit history, but leaves them with monthly bills that are small enough to pay off in full, so they don’t have to pay any interest.”
“It’s getting to the point where, if I’m out and about, I’m using plastic the whole time,” Pintacuda said. “It’s just so much easier.”
The survey was conducted by Princeton Survey Research Associates International for CreditCards.com from July 17 to 20 and from July 24 to 27. It contacted a representative sample of 1,497 adults, 983 of whom had a major credit card — American Express, Visa, MasterCard or Discover. The cardholders were asked, “When you pay for something in person that is less than $5, do you usually pay with cash, a credit card or a debit card?” The margin of sampling error for the cardholders is plus or minus 3.7 percentage points.