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Cash Usage Slips as Cards Gain Popularity for Small Purchases

[Saturday, April 9th, 2016]

It used to be that when folks bought something small, they always paid with cash. In fact, many places wouldn’t accept a debit or credit card payment for an amount under $10 or so. But while that’s still true in some stores, it’s becoming more and more common for people to pull out the plastic for purchases under $5.

That’s according to a recent report that shows card payments gaining on cash, even for small purchases. About 60% of survey respondents reported that they usually pay for a purchase under $5 with cash, but almost 40% use a card. Twenty-seven percent said they’d use a debit card for a purchase under $5, and 11% said they prefer to use a credit card. Overall, cash usage has fallen seven percentage points in the last two years. Debit card use is up by five percent, and credit card usage is static.

Age makes a difference in payment preference

Looking at the demographics, younger folks are more likely to pay for purchases with plastic, while folks over fifty prefer cash. In fact, they strongly prefer it—74% of the over-fifty set said they prefer to pay with cash when the amount of the transaction is small. Millennials—those ages 18-34—prefer debit (46%) or credit (18%), while people 35-49 generally prefer cash (41%).

There was a geographic element to people’s preferences, as well. Seventy percent of rural cardholders said they’d rather use cash for small purchases, while city-dwellers were more comfortable using credit cards. Only 59% or urban inhabitants and 54% of suburbanites preferred to use cash.

Residents of the Northeast and Midwest also vastly preferred to pay with cash, compared with people in the West, where only 46% were fans of cash payments.

People with higher incomes tended to shy away from cash, while lower-earners preferred to pay using cash instead of a card.

Credit cards offer purchase protection

One reason that credit is becoming more popular, according to the survey, is that credit cards offer more protection against fraud and identity theft. They also offer purchase protection in the form of extended warranties and price matching guarantees, as well as incentives like reward points and cash back.

The survey included telephone interview responses from over 600 adults living in the United States. All of them held major credit cards. The survey was conducted in March 2016.

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