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Study: Credit transaction amounts fall — along with cash use

April 14, 2017

Consumers are increasingly using credit cards to pay for small transactions, according to a new CreditCards.com survey.

In a national telephone survey of 674 credit cardholders, 17 percent said they typically use credit cards for in-person purchases of $5 or less — up from 11 percent in a 2016 survey.

Accordingly, the number of cardholders who said they prefer cash (55 percent) and debit cards (24 percent) for small transactions has declined — by 3 percent in each category.

"There was a time when you just didn't use your credit card for certain kinds of purchases," Susan Herbst-Murphy, consumer credit and payments industry expert at the Federal Reserve Bank of Philadelphia, said in a press release. "That has changed."

The popularity of credit cards for small purchases indicates a shift away from cash in American society, according to the release. The Federal Reserve has said that 32 percent of retail payments were made with cash in 2015, down from 40 percent in 2012. 

This year's survey also asked cardholders what payment methods they prefer for purchases of $500 or more. More than half (57 percent) said they mostly used credit cards for this type of spending spends in the past 12 months, while 42 percent relied on cash, debit cards and checks (1 percent did not respond).

Additional findings from the survey:

• Younger consumers pull out plastic for the small stuff — millennials in particular are cash avoiders: 53 percent of those age 18–36 prefer to pay for small items with a debit or credit card. Cards are also the top choice for respondents making $75,000 or more per year and college graduates.
• Boomers and seniors still prefer cash — 70 percent of respondents in these demographic groups said they used cash to pay for items that cost $5 or less. Consumers with lower incomes and those with a high school education or less also prefer cash.
• Generation debit— 36 percent of Gen-Xers said they used a debit card for five or more large purchases ($500 or higher) within the past year — more than any other group. Also, they tend to use debit cards more than older groups, who primarily pay with credit cards.
• Few cardholders pay big tickets with cash — only 10 percent of cardholders of all ages said that they used cash for most of their large purchases; 24 percent used debit and another 8 percent used checks.

"It's become much more socially acceptable to go cashless," said Utpal Dholakia, a marketing professor at Rice University, who studies consumer behavior. "I have less than $20 in my wallet because I hardly ever use cash." 

Mobile payments could make cash even more scarce, if providers can resolve consumer concerns over security and convenience, according to the release.

"The pain of paying with mobile is going to be less than paying with a credit card," Dholakia said. "You're just clicking a button and in a couple of seconds, your payment is done."

CreditCards.com commissioned Princeton Survey Research Associates International to conduct telephone interviews with 1,001 adults living in the continental United States. Interviews were conducted by land line and cellphone in English and Spanish by March 16–19.