Consumers Choosing Cash Over Debit Cards

Consumers still pull out cash at the register to cover small purchases, research shows.

According to a recently-released report from consulting firm Javelin Strategy & Research, almost 80% of consumers used cash to make a purchase throughout the past seven days, as compared to 65% of those who used a debit or credit card.

And more are willing to resort to making more payments using greenbacks, should push come to shove. When Bank of America attempted to impose a $5 monthly fee upon their customers for using a debit card for anything other than ATM transactions, some 32% of people surveyed claimed that they would start to use cash to make their purchases instead of a debit card in order to avoid the fee. Only 25% said they would counter the fee by using a credit card.

The main intent of the Javelin report was to shed some light upon how recent federally-mandated financial regulations have influenced the way people pay for things.

"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." said Javelin`s president, James Van Dyke, in a statement.

Cash is experiencing a resurgence in popularity, partly because of the concerted efforts of stores and retailers to encourage their patrons to choose cash over plastic by pointing out paying with cash doesn’t cost any extra fee-wise.

Financial institutions, on the other hand, prefer consumers to choose credit cards instead. Recent financial reforms have capped the amount they can collect from merchants by way of interchange fees for debit card transactions, but no such restrictions currently exist on credit card transactions. To increase the appeal of using credit, lenders have amped up the rewards and perks cardholders can earn for making new charges.

"[Financial institutions] new messaging is that rewards are around something specific. And to get [consumers] to use credit more actively, especially if the price point is $11 or below," said the director of payments research at Javelin, Beth Robertson, as reported by the Huffington Post.

Many consumers who relied upon debit cards throughout the recession as a way to better manage their spending are likely to show a preference for cash, however. Despite the lack of rewards in the form of bonus points or airline miles, the biggest reward users of cash receive is not increasing their debt.

Jennifer Brown

Jennifer Brown, an external business consultant working with a Fortune 500 company, has years of experience to her credit. Despite having a busy schedule through the day, she takes time out to write articles dealing with credit cards, payday loans and other financial aspects. She has completed her Bachelor degree in Financial Services from Columbia University and has been actively involved in various activities for the betterment of society.