Credit Cards and Debit Cards are replacing Cash

It is something that we have all believed but never confirmed; that credit and debit cards would someday replace cash as our primary means of paying for transactions. Well, David Morrison with Credit Union Times is reporting just that! In his online article, David points to research done by the research firm Javelin Strategy and Research that shows a steady growth in the use of cards versus a steady decline in the use of cash.

Surveying 3,210 US consumers from an assortment of backgrounds, economic situations, and locations, the study found that the majority of cash transactions were completed on small point of sale items. Although each consumer has a personal threshold that determines when to use cash or card, it can be assumed that most cash transactions at the POS are below $5 as most of the items surrounding POS registers are often ‘urge’ related, such as gum, energy drinks, over-the-counter drugs, and other low price products. One can allude to this from the conclusion Javelin offered in the forecast, “Cash may be the most commonly used payment option for POS retail transactions, but frequent usage does not necessarily translate to a higher sales volume.”

The study specifically states that prepaid debit cards have also replace many regularly purchased gift cards. The thought behind this is that prepaid debit cards offer greater flexibility in where those dollars can be spent. Nevertheless, retailers and large businesses are looking to combat this by offering cash-back and discounts on gift cards.

Number-wise, big ticket items meet the individual’s purchase threshold and will often be put on a debit or credit card. The study shows that 31% of retail sales are completed using debit cards, while credit cards come up at 29% and cash only 27%. Javelin’s forecast that by 2017 cash will only account for 23% of sales volume. For the full breakdown by David with Credit United Times, read the article Cash Dethroned by Cards: Print Preview.