From DC parking meters to New York taxi cabs and online shopping, the ways in which U.S. consumers can pay for services and purchases with plastic are rapidly expanding. Not surprisingly, credit and debit card payments continue to gain ground as the preferred payment methods over cold, hard, but oh, so old-fashioned cash.
According to a recently released Survey of Consumer Payment Choices from the Federal Reserve Bank of Boston, 93.4 percent of U.S. consumers now have either a credit card or a debit card, and they make more than half of their payments with either a debit or a credit card.
Debit cards, however, have outpaced credit cards as the preferred payment method: while 78.3 percent of U.S. consumers reported using credit cards in 2008, a full 80.2 percent of consumers used debit cards, a substantial increase over the 67 percent using debit cards in the 2007 survey. Only 17.2 percent had a prepaid credit card, often a payment instrument of choice for people with bad credit.
The survey found that consumers are getting increasingly comfortable with paying bills online or doing other financial transactions via the Internet. More than half of the people surveyed (52.5 percent) had paid bills online, and 73.4 percent of respondents said they had had money deducted electronically from their bank account (for example, by setting up automatic monthly bill payments).
On average, U.S. consumers make 76.7 payments per month, and plastic is the preferred payment method. More than half, (52.9 percent) of payments are made using credit cards or debit cards; only 36.5 percent are made using checks or cash. The remaining payments were made electronically or directly from income. (These numbers do not reflect the dollar value of payments.)
Credit cardholders on average had 3.5 credit cards; the average age for people under 35 to get their first credit card was 20.8 years.
Checks are still commonly used, however, 51.6 percent of the people surveyed said that they were writing fewer checks in 2008 than they did in 2005. During the same period, 49.5 percent increased their use of debit cards; 42.6 percent had increasingly turned to electronic bank account deductions, and 60.6 percent had increased their use of online banking bill payments.
Cash was still the payment of choice for retail purchases, while checks remained the most popular way of paying bills. 86.4 percent of respondents said that they used cash when purchasing items at retail stores, such as grocery stores or clothing stores; but many also paid by credit cards (65 percent) and debit cards (64.5 percent).
Consumers rated security and ease of use as the most important features in choosing which payment method to go with.
The survey is part of an ongoing effort to chart the changes in consumer payment choices as U.S. consumers increasingly transition away from paper-based payments to electronic payment methods, such as credit cards and debit cards. The report was based on a 2008 survey of consumer payment choices developed by the Consumer Payments Research Center of the Federal Reserve Bank of Boston; it was implemented by the RAND Corporation.
