•  A smart pig on a stack of books
  • Should customers use cash or cards?


    Consumers choose between cash and their debit or credit cards when paying for everyday purchases.

    For many, convenience is the biggest factor that plays into the choice. Some people never carry paper money, opting to always pay with cards. For others, the extra fees associated with cards make them skeptical of that option, so they always go with cash.

    Cost is also a factor. A 2012 study that tracked the monthly spending of Americans found that nearly 40 percent of all transactions were paid for by cash, compared to 25 percent for debit cards and 17 percent for credit cards, according to the Federal Reserve Bank of San Francisco [1]. However, the same study found that cash accounted for just 14 percent of total consumer transaction activity, compared to a 27 percent share for either debit or credit cards.

    The average value of a cash transaction is $21, compared to $44 for debit cards, the Federal Reserve study determined.

    So which one should customers carry with them for their regular trips to the mall or grocery store? Here are a few reasons to support both cash or cards:

    When deciding if to use cash, customers typically consider how much they are going to spend and what they are planning to buy.

    The best thing about cash is its reliability. Unlike a card, it has no expiration date or spending limit. Once a cash transaction is over, you don't have to think about paying it back later on, unlike one would with a credit card. Most stores will accept cash for nearly every type of purchase, and there are no additional fees tacked on. For items of low value, it is common to pay with bills and coins.

    In fact, on purchases that cost $50 or less, the Federal Reserve found that consumers use cash half the time. When that total reaches $100, the amount of people paying in cash drops to less than 10 percent.

    How consumers spend also depends on what they are spending their money on. For purchases such as gifts and food, cash is used more than half the time. When it comes to financial services, such as loans, only 17 percent of payments are made with cash.

    One of the most common arguments for using cards is ease and convenience. If you only have a $10 bill in your wallet, then you are limited to purchases of that amount. With a card, you have more freedom to buy what you'd like. This has a downside, however, as it is easier with a card to unknowingly spend more. In fact, McDonald's found that people spent an average of $7 when paying with cards, compared to $4.50 when using cash, according to NerdWallet [2].

    The ease of using cards coincides with another of its greatest benefits: that card purchases are not immediate. While cash is immediately handed over from one party to another, a card payment is usually made at the end of a month. Working with a banking service to make a financial plan to manage card payments can allow a customer to map out when specific items will be paid off.

    A customer is also able to split purchases on multiple cards. In fact, a 2013 study found that the average customer had 2.19 different cards in their wallet, according to the credit scoring firm Experian [3]. That number fluctuates depending greatly on age, as adults between 47 and 65 have the highest number of cards, with an average of 2.66 per person. 

    [1]. Cash Continues to Play a Key Role in Consumer Spending: Evidence from the Diary of Consumer Payment Choice

    [2]. Credit Cards Make You Spend More: Studies

    [3]. What is your state of credit?

  • The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.