Paper trumps plastic

Although we now have many different options of how to pay for things, cash is still king, accounting for a 40% share of all transactions according to a recent analysis of October 2012 diary studies by two Federal Reserve Banks.

Paper, cash plus checks, still dominate all payment options, accounting for 47% of all payments. Plastic, credit and debit cards, account for 42% and electronic and other account for 11%.

Cash is used far more frequently as payment for low-value transactions than for high value transactions.

About 43% of consumers say that the debit card is their payment instrument of choice followed by 30% preferring cash.

The preference for cash and debit card is highest with younger consumers while the preference for credit card and check is highest with older consumers.

Lower income households prefer cash and debit card and higher income households prefer credit card payments.

With the advent of the iPhone’s Apple Pay, we should expect the use of actual plastic for payment to decline and the use of virtual electronic-linked plastic to increase.