Is Cash Making a Comeback?

Javelin Strategy & Research conducted research to determine consumer attitudes toward payment options such as – cash, debit cards and credit cards. They surveyed more than 3,200 consumers in October 2011.  The title of the report was “Evolution in Consumer Payments Behavior: How the Durbin Amendment and the Economy Are Driving Payment Change”.

Debit card fees

The Durbin Amendment set the debit card swipe fees merchants are charged by the issuers from $.44 to $.21 for the large banks.  This reduced their revenue by half for this category and is now projected to be $12 billion annually.   Then several mega banks announced that they were going to charge debit card fees beginning in October 2011.  Because of the backlash from consumers and politicians, these fees were canceled.   Some consumers closed their bank accounts and switched to credit unions.

It is no wonder, that 70 percent of those surveyed felt that the debit card regulations benefited the banks, while only 30 percent felt the regulations benefited the merchants.  A majority (73 percent) liked having debit cards as a purchase option.

Highlights

If the banks started charging a fee for debit cards 32 percent would use cash, 26 percent would switch banks, 25 percent would use credit cards, and 13 percent would use checks.

A majority of the responders used cash – 79 percent had made cash purchases within the past seven days.

90 percent would require a discount of 3% or more to switch to another payment option.

72 percent of the underbanked consumers most frequently use cash for any type of purchase; and only 6 percent of these consumers use prepaid cards most frequently.

“The full effects of Durbin remain to be seen,” said James Van Dyke, President of Javelin. “The recession led many people to turn away from credit cards in favor of debit and prepaid cards as ways to control debt, but this trend seems to be slowing as the economy stabilizes. Today, there are more conflicting pressures on payment choice than ever before. Stakeholders should monitor payment trends and identify profitable ways to influence the payments mix.”

This survey shows the more consumers were using cash and debit cards for purchases. They were not loyal to the banks and would switch if they were charged fees.   It is important to review your statement to determine what fees you are paying.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Report, Debt, Financial, Money & Identity

This post was written by John Ulzheimer