Cash or credit card?
Which is better?
The latest cash vs credit card spending statistics WILL shed a light to that!
Cash vs Credit Card Spending Statistics (Editor’s Pick):
- 80% of consumers prefer using cards.
- 63% of consumers have 2 or more credit cards.
- Cash represents 26% of consumer transactions in the US.
- 80% of all cash transactions are for payments under $25.
- 60% of consumers use a cashback card.
- Consumers are willing to spend up to 100% more when using a credit card.
- 80% of consumers use a debit card for everyday purchases.
The majority of us have wallets filled with too many cards and little too little cash…
Unless you are one of those people that uses cash for everything.
How many Americans use credit cards?
More than 191 million adults in America have a credit card.
Before we move on with the rest of the facts, let’s talk about:
Types of Payment Methods
Seeing how we will be comparing the usage of cards and cash throughout the article, it seems suitable to start off with defining and explaining the most commonly used payment methods.
The most common types of payment methods used are:
- Credit Cards
- Debit Cards
- Electronic Payment Systems
- Mobile Wallets
Cash is pretty self-explanatory. It is the Benjamins, the Jackson bills… or, if you are lucky, you may be one of the rare owners of the discontinued 500 bill.
Besides having a jar full of coins in your car and hopefully a lot of Benjamins in our wallet, you probably own a few cards.
Not every card is the same though.
Let’s start with a credit card definition.
When you are using a credit card, you are basically borrowing money from the bank. The bank determines your credit card limit. This is the maximum amount you are allowed to spend.
Well, you can spend more but your bank will get mad. In fact, exceeding your limit or getting near your limit can hurt your credit score. The credit card utilization rate is an important factor when it comes to calculating your score.
Don’t believe us? These credit score statistics prove it.
Now, where were we? Ah, yes. Credit cards.
At the end of each month, you need to pay your credit card bill in full – and settle all of your debts. If you do – then you won’t get charged interest.
However, if you carry your credit card balance into the next month, then you will get charged interest on the unpaid balance.
By paying off your credit card balance fully and on time, you may be entitled to rewards. So, yeah – you can make money by spending money… responsibly!
What is the main difference between a credit card and a debit card?
When you are using a credit card, you are borrowing money from the bank to pay for goods and services. Then, you are paying the loan off at the end of the month.
When you are using a debit card, you are using money that you own. The money comes from your bank account – it could be money that you deposited, saved or earned.
PayPal is the best example of an electronic payment system. It is used for online money transfers.
(If you’re looking for more information on PayPal statistics, this is your chance.)
And then, a mobile wallet. It is basically a virtual, online wallet that stores your card info. You can use it at stores that have a digital payment terminal.
Now that we have explained the different types of payment methods, let’s move on with the statistics:
Cash vs Credit Card Spending Statistics
1. 80% of consumers prefer using cards.
According to TSYS, the most preferred payment type is a debit card. What’s more, debit has been the preferred method of payment in all previous reports of the Consumer Payment Study since 2013. All, except for the year 2016, when a credit card was the preferred payment method.
(Image: Custom Credit)
Who pays with credit cards:
- 54% of consumers prefer debit cards.
- 26% of consumers prefer credit cards.
- 14% of consumers prefer cash.
Debit cards are the preferred payment method among all age groups.
2. Credit cards are the preferred payment method for households with an income higher than $100,000.
According to the 2018 credit card usage statistics, this is the preferred payment method among households with higher incomes. The preferred payment type for households making less than $100,000 is a debit card.
In 2017, credit cards were the preferred payment type for households with incomes higher than $75,000.
This could be attributed to the high credit card delinquency rates as well as the high credit card rejection rates.
3. It is estimated that the total number of debit cards in the US in 2018 was 5.36 billion.
Debit card use is on the rise!
There were only 235 million debit cards in the USA at the beginning of the millennium, in 2000.
In 2008, the number of debit cards in the USA reached 4 billion.
According to these debit card usage statistics, there were an estimated 5.36 billion debit cards in 2018.
4. There were 599 million VISA debit cards in the USA in 2019.
There were approximately 600 million VISA debit cards in the third quarter of 2019 in the USA alone. Worldwide, there are more than 1.6 billion!
5. There were 216 million debit or prepaid MasterCard cards in the U.S.
In 2018, there were more than 200 million MasterCard debit cards in the US alone. Worldwide, excluding the US, there were 933 million cards.
6. 63% of consumers have 2 or more credit cards.
US credit card usage statistics show that most people have multiple cards. In fact, more than half of American consumers own at least 2 credit cards.
(Image: Custom Credit)
Here what the TSYS U.S. Consumer Payment Study found:
- 37% of consumers own 1 credit card,
- 28% of consumers own 2 credit cards,
- 16% of consumers own 3 credit cards,
- 19% of consumers own more than 4 credit cards.
7. As of February 12, 2020, there is cash worth $1.75 trillion in circulation in the USA.
(Source: Federal Reserve)
Although some countries are getting closer to being a cashless society, the amount of US cash in circulation these past years is increasing.
Total US currency in circulation by year:
- 2018 – $1.67 trillion
- 2017 – $1.57 trillion
- 2016 – $1.46 trillion
- 2015 – $1.38 trillion
- 2014 – $1.3 trillion
- 2013 – $1.2 trillion
- 2012 – $1.13 trillion
- 2011 – $1.03 trillion
- 2010 – $0.94 trillion
- 2009 – $0.89 trillion
- 2008 – $0.85 trillion
- 2007 – $0.79 trillion
- 2006 – $0.78 trillion
- 2005 – $0.76 trillion
8. Cash represents 26% of consumer transactions in the US.
(Source: Federal Reserve)
As card payments are becoming the norm, you may be wondering:
What percentage of transactions are cash?
The 2019 Diary of Consumer Payment Choice has found that cash payments represented 26% of all transactions in the USA. In 2017, cash represented 30% of all transactions. So, there is a small decline in use of cash in the USA.
Cash also accounts for 35% of in-person payments.
9. Debit cards account for 23% of all payments.
(Source: Federal Reserve)
Debit cards remain the most used payment method. They account for 28% of all transactions.
And according to payment method statistics, credit cards represent 23% of all payments.
Overall, more than half of all transactions are done with a card, whether it is debit one or a credit one.
As for in-person payments, debit cards account for 30%. Credit cards account for 25% of all in-person transactions.
10. 80% of all cash transactions are for payments under $25.
(Source: Federal Reserve)
Cash is mainly used for small value purchases. In fact, 80% of all cash transactions are for payments below $25. And 50% of all transactions for payments under $10 were in cash.
Have you ever noticed how stores have cash discounts or credit card minimums?
The reason for this is that merchants need to pay a processing fee to card networks such as American Express.
For example, the store needs to pay 3% of each transaction to the card network. And instead of paying the processing fee, some stores decide to offer a cash discount.
The dollar amount spent in cash vs. credit transactions is, in general, smaller for the former payment method and higher for the latter.
11. The number of VISA credit cards in circulation in the USA was 336 million in 2018.
(Source: Credit Cards)
Worldwide, there are more than 1 billion VISA credit cards in circulation worldwide. Out of these, more than 300 million are in the USA alone and more than 700 million are outside the USA.
12. The number of MasterCard debit cards in circulation in the USA was 231 million in 2018.
(Source: Credit Cards)
There were 644 million MasterCard cards outside the US at the end of 2018. In the US alone, there were more than 200 million cards.
13. The average American owns 3 credit cards.
We previously mentioned that most Americans own multiple credit cards.
According to credit card statistics from 2019, the average American owns 3.
Here are some other credit card ownership statistics:
- Millennials own 3 credit cards on average.
- Gen Xers own 4 credit cards on average.
- Baby Boomers own 5 credit cards on average.
- 1 out of 10 Americans owns 6 or more credit cards.
14. 60% of consumers use a cashback card.
The most commonly owned credit cards are cashback and store credit cards.
How do cashback credit cards work?
Every time you use your card, you get a certain amount back. So, let’s say you have spent $1,000 this month. If you get 1% back, then you have ‘earned’ $10.
How do store credit cards work?
Most store credit cards can only be used with that retailer only, though there are some open-loop credit cards. If you are using a store card, you may be eligible for a lot of discounts within that store.
However, if you don’t frequent the store often, there is no point in getting one. In general, store credit cards have high-interest rates and lower credit limits.
Now that we have gotten that out of the way, let’s check out the most commonly owned types of credit cards by age:
(Image Source: Fool)
15. Most consumers would use cash or a debit card for a $10 purchase at a local store.
(Source: Federal Reserve)
As stated in a report done by the Federal Reserve, most consumers would use cash or a debit card for smaller purchases in local stores. Among the least commonly used methods is a mobile app.
Here is a breakdown of the results:
- 37.1% would pay with a debit card
- 36.8% would pay with cash
- 24.3% would pay with a credit card
- 0.9% would pay with a check
- 0.1% would pay with a mobile app
The report is based on information from 2016. Perhaps there has been an increase in small value cashless transactions.
According to mobile payment statistics, 1 billion people worldwide will use a mobile payment app in 2020.
16. 65.6% of Americans aged 15+ own a credit card.
(Source: The Global Economy)
In 2017, almost 66% of Americans aged 15 or older had a credit card.
The data is from The World Bank, and here is the percentage of Americans with a credit card this past decade:
- 2011 – 61.94%
- 2014 – 60.13%
- 2017 – 65.6%
Globally, only 19.28% of people aged 15+ have a credit card.
Here are the credit card usage statistics by country:
- Canada – 82.58%
- Israel – 75.02%
- Norway – 70.50%
- Luxembourg – 69.80%
- Japan – 68.38%
- USA – 65.60%
- Switzerland – 65.47%
- Hong Kong – 65.42%
- UK – 65.37%
- South Korea – 63.66%
17. The global digital payments market is expected to reach $132.5 billion by 2025.
First, let’s start with the definition of digital payment. Digital payments can be defined as transactions that are made digitally, over the internet or a mobile channel. We are all familiar with card payments and EWallet payments, which are good examples.
Digital payments reports estimate that the market share will reach $132.5 billion at compound annual growth rate (CAGR) of 17.6% over the next six years. This can be attributed to the growing demand for fast and secure transactions, as well as the increased growth rate in China and India.
18. The global payments market size is estimated to reach $2 trillion by 2025.
(Source: PR Newswire)
As stated in the Valuates report on the market size, status and 2018-2025 forecast on global payments, the market size will have a CAGR of 7.83%. The market of mobile online payments based on near-field communication (NFC) is growing fast.
Some important payments market analysis and trends featured in the report are:
- The first region to perform more than 50% of transactions electronically is North America.
- The Asia-Pacific region accounts for almost half of the global payments revenue.
- In Latin America, the payments market has been the fastest-growing industry.
Some of the top companies in the payment market are:
- Bank Of America
- JPMorgan Chase
- Wells Fargo & Company
And speaking of PayPal, if you want to read more about it, then check out the latest PayPal statistics
19. Consumers are willing to spend up to 100% more when using a credit card.
The most important question in the cash vs. credit card debate is:
Do people spend more money on credit cards?
As stated in the study ‘Always Leave Home Without It’, participants were willing to spend up to 100% more when paying with a credit card!
One group was required to pay with cash and the other with a credit card. However, both groups needed to pay by 5 p.m. the next day. Tickets to a sold-out game were auctioned and the participants had to write down their bids.
The participants who had to use a credit card were more prone to overpaying.
Here is the average amount both groups were willing to spend:
(Image Source: Value Penguin)
20. 80% of consumers use a debit card for everyday purchases.
(Source: Consumer Credit)
The majority of consumers use their debit cards to pay for gas, groceries, and meals.
However, a small part of the respondents stated that they are using cash instead of a debit card for everyday purchases.
21. 39% of consumers use credit cards for large purchases.
(Source: Consumer Credit)
When it comes to buying furniture, appliances, paying for travel arrangements, etc, a large part of consumers have stated that they use a credit card. A smaller part, or 14% of those who are less apt to use their debit card, use cash.
58% of those who stated they use it for larger purchases said they cannot afford it at the time of purchase but are hoping to be able to afford it when the bill comes.
As the latest credit card debt statistics show, the current credit debt exceeds $1 trillion. This can be attributed to the fact that credit cards lead to over-shopping, and buying things we cannot afford.
22. ATM withdrawals have declined by 2.8%
(Source: Federal Reserve)
The rate of ATM withdrawals has decreased from 2016 to 2017. This means that people are visiting ATMs less often.
Which Payment Method is Best?
Wondering which payment method is best for you?
Let’s compare the use of cash vs. credit vs. debit.
Credit Card Fraud, Stolen Money and Identity
If you lose cash, then it is probably gone for good. The only silver lining here is that you aren’t at risk for a stolen identity or credit card fraud.
Yet, credit card fraud is not something to be taken lightly. According to the latest credit card fraud statistics, Americans lose billions of dollars each year due to fraud.
However, if your credit card gets stolen, you do have some level of protection. Once you notice that the card has been stolen, you need to contact the card issuer. If you report that your card has been stolen before a fraudulent charge has been made, then you won’t be liable for the charges. In other words – you won’t have anything stolen from you.
If a charge has been made after you reported that your credit card has been stolen, then you will be liable for up to $50.
This is not the case with an ATM or debit card. If you report the theft within two days you will be liable for $50. After two days, you can be liable for $500. And if you don’t notice that your debit card has been stolen after 60 days, then you will lose all the money taken from your account.
Perks and Rewards
Some of the best features of credit cards are the various perks and rewards offered. By using the card frequently, you can rack up points and get a cashback, discount or a special offer. But don’t let this fool you! The cash back you get is usually a small percentage of the purchase.
Credit card membership fees are usually higher than debit card membership fees.
It really is a never ending cycle of surcharges and fees:
- Annual fee,
- Late fee,
- Balance transfer fee,
- Foreign transaction fee,
- Card replacement fee,
- Over limit fee,
- Finance charge…
And if you carry your balance over the next month you will be paying high rates of interest. This is a comment mistake credit users make. They usually only pay the minimum payment, and then end up stuck with high-interest debt.
As for cash… well there are no fees. Only the ATM fees!
And speaking of ATMs, did we mention the cash advance fee?
When you need to draw from the line of credit the bank has lent you, you also need to pay the cash advance fee.
So it is definitely cheaper to withdraw cash using a debit card or an ATM card.
Improving Your Credit Score
If you are one of those people who avoids banks like the plague and prefers to pay cash for everything…then don’t be surprised when the banks turn your back on your when you come begging for a loan.
To get a loan, you need to have a credit history. The longer you have had the account – the more points you get for having credit history.
Damaging Your Credit Score
This is one of the disadvantages of credit cards that needs to be discussed before you get one. Each missed or late payment and the amount of credit debt you have will cause credit damage that is hard to undo.
Not impossible, but still.
It takes years to build good credit and just a few months to ruin it. If you don’t have a stable income, then a debit card may be a better option for you.
The ability to pay for emergency expenses is not one of the features of debit cards. This is also one of the many reasons consumers opt for a credit card.
If an emergency expense occurs that you cannot afford, you can use your credit card and then pay the money back later. But if you are only using cash or a debit card and don’t have any savings, then you will find yourself in a tough financial situation.
A word of advice: Don’t use your credit card for nonessential purchases you can’t afford. For example, upgrading your phone. Do use if your car breaks down and you don’t have another mode of transport.
Using a credit card responsibly can improve your finances.
If you pay for something with cash and a debit card and are not satisfied with the service or the goods are damaged, then it is up to the merchant whether you will receive a refund.
But if you used a credit card, then you can call your bank and dispute the charge. This is another one of the benefits to cardholders.
Accepted Payment Methods
Not every merchant accepts cards and sometimes paying with cash isn’t possible – as is the case when buying something online.
So it is best to carry both cash and cards with you.
While cash is mostly used for in-store purchases, you need to have at least one card that you can use for your online purchases.
According to online payment statistics, there are millions of active users of online payment platforms. Even if we aren’t close to a cashless society, digital payments are widespread.
If you are traveling in a country that uses another currency, you can still use your card. However, make sure you check what the currency conversion fees are.
Exchanging cash for local currency is better if you are traveling in a place where cards aren’t used often.
Getting to know all the credit card advantages and disadvantages will help you make a more informed choice on when to use a card and when to pay with cash.
Both credit and debit cards are convenient – provided that you use them responsibly. If you don’t trust your financial decisions, stick with cash for everyday purchases.
Cash vs credit card spending statistics proves that a combination of various payment methods is the only way to not be limited in your purchases.
See you around on SpendMeNot, guys.