When starting your own business, it’s important to consider what types of payments you want your business to be open to. Not all customers will want to pay using the same payment method but the more options you have, the more processing and paperwork you will have to fill out.
As a result, some businesses have considered going cash only or credit/debit card only – but will doing this affect your business? How will customers react?
If you are wondering which payment methods your business should offer, then here are 22 cash credit card spending statistics to help you make up your mind. Check them out below to learn more about your target audience’s spending habits when it comes to handling cash or credit cards.
22 Key Cash Vs Credit Card Spending Statistics
1. In 2021, Cash Accounted For 19% Of Us Consumer Payments While Credit Cards Rose To 27%
This statistic is a huge deal as it is the first time since the Diary of Consumer Payment Choice started its annual reports that credit cards have surpassed cash as the most commonly used payment method of choice.
However, it’s worth noting that this information could be a little skewed and cash pay will still reclaim its crown in the near future.
This is because due to the COVID19 pandemic, a lot of businesses stopped accepting cash as a form of payment due to concerns around the transfer of the disease via handling cash. So, it’s likely that some people were forced to pay with their credit card when they would have prefered to pay with cash.
As more businesses allow for cash payments once more, we can expect to see a climb in the use of cash as payment. However, it’s also equally likely that a lot of people may just stick to using their credit card and not switch back to cash.
It’s a tumultuous time for cash at the moment but in the next annual report from the Diary of Consumer Payment Choice, we may see a change again in spending habits – or perhaps in the next year, or year after that!
2. Cash Was In Decline Before COVID19
According to the above study, the decline of cash was happening even before the COVID19 pandemic with the number of average cash purchases per month decreasing from 14 to 11 between 2016 and 2018.
So, it’s safe to assume that this trend will probably continue post COVID19 too.
3. Credit Card Use Was Also Increasing Before Covid19
The same study also shows that the average amount of monthly payments made using credit cards has increased prior to COVID19. This is because credit cards were used to make an average of 8 monthly payments in 2016, but this had steadily risen to 10 monthly payments in 2018.
Again, it’s safe to say that this trend will also continue post COVID19.
4. Over 50% Of Americans Would Use A Debit/Credit Card To Pay For Purchases Under $10
When running a business, it’s important to think about the cost of your products and the prices you sell them to your customers for. This is because the average amount your customer spends at your store will influence their payment method.
5. According To The 2021 Diary Of Consumer Payment Choice Report, The Average Value Of Cash Held By An Individual Consumer Rose To $74, Increasing From The Former Number Of $54 In 2019
Although it is reported that American consumers are using less cash, those who prefer to use cash as their go-to payment method are typically carrying a lot more than they did a few years ago.
As a business, this could be a good sign for you. The more money a customer has in their wallet, the more likely they will spend it at your store. However, the reason behind this increase could be due to the rise in prices in general – and so consumers feel they need to carry more cash to cover the increase in costs.
6. Small Value Payments (Transactions Under $25) Have Dropped By 26% Since 2019
This statistic can be read in many ways.
On one hand, the reason behind this drop could be due to the financial hardships during and after the COVID19 pandemic. The cost of living rose in many countries around the world, including the US, and with it so did the prices of products and services.
On the other hand, it could be a sign that spending habits of consumers are changing. Perhaps people are shopping less and the result is that they spend more money over less shopping trips.
7. Under 25S And Over 65S Are The Age Groups Most Likely To Use Cash
According to ShiftProcessing, 34% of cash purchases are made by under 25s and 33% are made by over 65s. Understanding why is easy – under 25s are less likely to have access to credit cards or a bank account due to their age or lack of a clean credit score (especially due to student debt), while over 65s are less likely to trust and rely on technology.
So, businesses need to think about their target audience. If you have mostly teenagers and children purchasing candy from your candy store, making your store cash-free will cut out a large chunk of your audience!
8. Only 18% Of 25-34 And 19% Of 35-44 Year Olds Use Cash For Their Purchases
Another statistic from the ShiftProcessing report is that a majority of 25-44 year olds rely on alternative forms of payment over cash. This includes credit cards along with other methods such as debit cards, PayPal, apps, etc.
But again, this paints a very specific picture for businesses. If most of your customers are in this age group, then I’d recommend that you offer some kind of card payment option in your store or offer deals for those who pay via credit card online. This will help you draw in your audience.
9. Cash Is More Likely To Be Used By Lower Income Households
Again, businesses wondering whether to offer cash or credit card deals should consider their audiences. If most of your customer base are from lower income households, then they are more likely to pay with cash. In fact, only 7% of transactions from the lowest income households were made using credit cards as proven in the study above.
10. The Average Cash Purchase In The Us Is $22
What this means is that if your customers are going to pay in cash, they will on average spend around $22. Reasons behind this could be that carrying more cash can be unsafe or inconvenient, or that spending any more will leave their wallets empty.
11. The Average Credit/Debit Card Purchase In The Us Is $112
So, customers are more likely to spend more when using their credit card over paying in cash. This is definitely something business owners want to keep in mind, and something consumers may look on with worry as this is a sign that using your credit card can lead to overspending.
12. Cash Is Mostly Used For Gifts And Person To Person (P2P) Transfers
It’s important to keep in mind what kind of transactions are cash and credit cards used for. For cash, it’s mainly used as gifts or transferred to people to pay back for favors or private services.This means that not a lot of cash is handled by businesses.
13. Credit Cards Are Mostly Used For Purchasing General Merchandise
In 2018, 35% of general merchandise payments were made using credit cards. Also, 28% of food and personal care supplies were bought with a credit card – so this statistic helps prove that businesses handle a lot more credit card transactions over cash.
14. Consumers Spend 83% More Through Credit Cards Than With Cash
This statistic pretty much confirms that using your credit card is likely to lead to overspending compared to when cash is used – and businesses may want to take advantage of that to help boost their sales.
15. 62% Of Consumers Feel They Are Less Likely To Overspend With Cash
Consumers are aware that they are more likely to overspend on their credit card and more likely to stay on budget when paying with cash. So, this is definitely something for businesses to keep in mind.
16. The Average American Credit Card Debt Is Over $5,000
Although statistics prove that overspending is likely the more a consumer uses their credit card for payments, there is something that can hold a lot of credit card holders back and make cash the more attractive alternative for them – their credit card debt.
In 2022, the average American credit card debt is $5,221 – a huge increase compared to a few years ago. So, could this climbing trend of credit card debt lead to a sudden reduction in credit card use?
17. In 2020, Online Or Mobile Purchases Increased To 24% Of All Purchases
This statistic is an important one as it gives businesses an insight into how customers are spending their money. Seeing that nearly a quarter of all consumer sales are made through the internet (and, as a result, unlikely to use cash to pay), a lot of businesses may be tempted to set up a website and estore to sell their products online and in store.
However, this rise did happen over the COVID19 pandemic – when a lot of stores shut their doors and consumers were forced to shop online, whether they wanted to or not.
18. 59% Of Americans Prefer To Use Their Payment Card
A 2020 survey revealed that although credit cards are only used for roughly 27% of transactions, 59% of US consumers prefer to use their payment cards. So, if you give your customer the option between cash or credit card, they are more likely to pay using their credit card.
19. 38% Of Americans Use Their Credit Card To Avoid The Inconvenience Of Carrying Cash
This statistic goes to show a key opinion a lot of Americans have around using cash for payments – it’s inconvenient. Credit cards take up a lot less room in someone’s wallet or pocket, plus they give the holder complete access to a larger sum of money for larger payments.
20. Chip Is The Most Used Method Of Credit Card In Store Purchases In 2017
If your business has a store, then you will want to make sure that it is capable of taking credit card chips. This is because according to a 2017 YouGovAmerica poll, ship is the most used method of in-store purchases.
21. 34% Of Credit Card In Store Purchases Are Made Using The Swipe Method
Businesses should also ensure that they can take credit card payments via swipe, as over a third of credit card payments are made using the swipe method in the US.
22. 58% Of People Plan To Stop Using Cash Completely After The Covid19 Pandemic
This final statistic is a glaring one for the future of cash in the United States. It seems that over half of Americans plan on going cash free after COVID19, but planning to go cash free and actually going cash free are two different things.
Still, it’s worth keeping this statistic in mind when looking to the future of your business and spending.
Cash Credit Card Spending Statistics – Frequently Asked Questions
Do Americans Prefer Cash To Credit Cards?
In a 2019 survey by GOBankingRates, 39% of Americans prefer to make payments with cash over 22% who said they prefer to make payments through their credit card. As a result, Americans do prefer cash over credit cards as, according to the same survey, it helps prevent overspending and allows Americans to stay on budget easier.
However, different surveys tend to come up with different results depending on the respondents.
Which Is Better – Credit Cards Or Cash?
Both credit cards and cash have their own disadvantages and advantages.
Credit cards are generally thought to be more secure than carrying cash which can easily be stolen or lost, while you can immediately cancel your credit card to prevent anyone using your card without your permission.
However, paying with credit cards can come with convenience fees while paying with cash can sometimes earn you a discount at some businesses.
Which method of payment is better for you as a consumer depends on factors such as your credit score or likeliness to lose your wallet. As a business, you need to consider if offering customers the choice of multiple payment opinions is worth the processing fees and increased paperwork that can come with them.
Will They Ever Do Away With Cash?
The future of cash is uncertain as more and more people rely on credit and debit cards. There are even online payment systems like PayPal, and currencies like bitcoin have gained a lot of popularity in recent years. Ultimately, cash is being used less and less in the US but this doesn’t mean we will see it disappear altogether in our lifetime.
Ultimately, cash offers a lot of different benefits and options for many people, and it’s hard to imagine a world without it. After all, cash has been around since 770 BC – I think it will survive for a lot longer.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.