Cash Is Still King for Small Purchases

NEW YORK (MainStreet) — Approximately two in three credit cardholders will opt to use cash often for purchases of less than five dollars, according to a new report.

The tendency to use cash increases sharply with age. Almost eight in ten credit cardholders age 50 and older prefer to use cash for small transactions. For cardholders between ages 18 and 49, it's virtually a dead heat between cash with 52% who prefer it and credit/debit cards with 46% who use it.

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The youngest cardholders, or those who are 18- to 29-year-olds, are the only age group to prefer plastic. Millennials with credit cards prefer debit over credit by a ratio of nearly three to one. Among all cardholders, debit outpaces credit by a two to one margin.

"The question is whether millennials will eventually embrace credit as they age and their financial situations change," said Matt Schulz, a senior industry analyst for "I believe they will due in a large part to the more lucrative rewards programs and better consumer protections from credit cards."

Using cash to pay for daily purchases has its rewards, because it can be a quick transaction and helps some consumers budget better, he said.

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Credit cards are a much better option than debit cards because if fraud occurs and you need access to the money, it can take banks an average of a week to refund the funds, Schulz said.

For some consumers, there is less middle ground and some choose to pay for everything with a credit card to build up rewards while others refuse to use credit cards for any purchases to control their spending, he said.