Cash Use—Is It Just An Age Thing?

Yet more research is showing the resilience of cash use in the U.S. People, it seems, just like to use it, especially for smaller purchases. Or they do for now, at least, as change may be afoot, especially among U.S. payment cardholders.

Coming on the heals of a Federal Reserve Bank of Boston report that found the U.S. ratio of cash in circulation relative to nominal gross domestic product has increased since 2000, issued its own research findings that show Americans still prefer paying for purchases under $5 with cash. However, their preference may be shifting to electronic alternatives, the company says.

According to, a credit card-comparison website, some 65 percent of American credit cardholders typically use cash to pay for purchases less than $5, while 22 percent use debit cards and 11 percent use credit cards. But whereas 77 percent of respondents to its survey ages 50 and older prefer cash, only 52 percent of those ages of 18 to 49 do, suggesting age affects the pattern.

Cash or plastic?

Millennials, or those consumers ages 18 to 29, already prefer plastic over cash, as they are especially beholden to debit cards by nearly a three-to-one ration credit cards. Among all cardholders, debit outpaced credit by a two-to-one margin, according to The breakdown: 11 percent prefer credit cards, 22 percent debit cards, 65 percent cash.

Princeton Survey Research Associates International conducted the phone survey for from July 17 to 20 and from July 24 to 27. It polled 1,497 adults, 983 of whom had a major credit card from 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.

Matt Schulz, senior industry analyst, noted in an announcement of the survey findings that one outstanding question is whether millennials eventually will embrace credit as they age and their financial situations change.

“I believe they will, due in large part to credit’s more lucrative rewards programs and better consumer protections,” he said.

Transition phase

Indeed, the casual use of plastic is moving steadily through age brackets, as the card-comparison site’s survey findings show. 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, it contends.

Among the key reasons include technological advancements at the point of sale that have made it just as fast to pay by plastic as by cash. Moreover, rewards have become a common credit cards feature, with two out of three credit cards offering rewards, and that has consumers chasing rewards through more card use, according to

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.

Conflicting results?

The Boston Fed’s report similarly found that cash use varies across age categories, but its findings were the opposite of what found. While internationally “older” people use significantly more cash than do younger people, younger individuals in the U.S. use more cash than do older individuals, according to the report.

That said, the Fed’s report didn’t limit the research on cash use to purchases less than $5. On the whole, however, consumers generally value cash for its perceived acceptance, costs, and ease of use.

In addition, though the levels of card ownership differ across countries, overall card ownership is rather high across the board, and consumers use only a few payment instruments in addition to cash, according to the Fed’s report. The prevalence of credit cards illustrates how socio-demographics plays a role, as differences in credit card ownership exist along all age, income, and educational groups.

“These differences suggest that there are factors related to the market structure that affect the prevalence of credit card ownership,” the report notes. Moreover, higher use of cash is associated with lower levels of card acceptance at the point of sale, and cash use varies across types of purchases and venues, the Fed report states.