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Consumer Payment Trends in the U.S.

Businesses routinely seek to appeal to consumers by understanding which goods or services they want to buy. But understanding how shoppers prefer to buy—that is, which forms of payments they favor, and why—is also critically important. Marketers, retailers, card associations and other product and service providers hope to make transactions easy and convenient for consumers, but they must also balance these requirements against their own needs. Meanwhile, in the post-recession U.S. marketplace the world of payments keeps evolving as consumers back away from credit cards, debit cards move toward saturation, online payment options proliferate, and contactless payments and mobile payments move closer on the horizon.

This all-new report from Packaged Facts examines consumer payment forms of all kinds, including credit cards, debit cards, gift/prepaid cards, cash, checks, online payment and emerging forms, with a focus on how consumer preferences have changed during the past five years and vis-à-vis the economic downturn and recovery. It includes:

  • Analysis of how Americans’ financial outlook influences their spending and payment preferences.
  • Demographic and psychographic profiling by payment form and consumer age, gender, race, geographic region, income, educational level, etc.
  • Focus chapter on cash, whose straightforwardness and immediacy makes it the payment choice of more than half of U.S. adults.
  • Focus chapter on checks, which despite declining usage remain popular for bill paying and are getting new legs via “digital reinvention.”
  • Focus chapter on credit cards, which have reached saturation and face other challenges including more restrictive legislation and declining usage among consumers looking to reduce their debt.
  • Focus chapter on debit cards, which continue to win followers but whose rise may be diverted by laws restricting overdraft fees.
  • Coverage of gift cards and other prepaid debit cards, which are creating a fast-growing “second-tier” banking system for those without access to traditional banks.
  • Focus chapter on new payment methods, including contactless, cell phone and Internet-based, all of which are jockeying for position in the next wave of payment forms.

Myriad data sources include primary data compiled by Experian Simmons and cross-tabulated by Packaged Facts to create customized profiles of those consumers shaping the U.S. payments industry now and into the future.

Read an excerpt from this report below.


Market Insights: A Selection From The Report


Responsible Spenders

Consumers who say they spend conscientiously and carefully are not likely to be particular fans of debit cards. Rather, they are more likely to prefer to use credit cards and checks. Those who agree that they’re “careful with their money” are 13% more likely to have a checking account or a check guarantee card (index of 113) and 12% more likely to have used a credit card in the last 30 days (112). While they are no more or less likely to pay bills with cash than their peers, they are 22% more likely to prefer to pay cash for the things they buy (122). This cash preference can be seen as a sign of responsible spending, since financial advisors in the media often recommend that consumers use cash as much as possible, because cash causes them to reflect on each purchase and to “feel” their spending, so to speak. Spending is still an abstraction with debit cards, even if debit cards do make it more difficult for consumers to fall into debt.

Levels of agreement with the lifestyle statement “I am very good at managing money” point to similar findings. People who agree with this statement are 22% more likely to often prefer to pay cash for the things they buy (122), 11% more likely to pay bills with a check (111), 13% more likely to pay bills with a credit card (113), and 15% more likely to have used a credit card in the last 30 days (115). [Figure 2-12]

Not surprisingly, people who manage their money well are more likely to feel financially secure. According to the results of a 2008 U.S. survey from global market research company Synovate, three keys to feeling financially secure are a cash emergency fund, a household budget, and carrying no long-term credit card debt. The survey found that 78% of respondents felt stress due to household finances overall. However, although 90% without an emergency fund felt stressed, only 56% of those with a six-month cash reserve did. Likewise, the stress level was higher among those who carried credit card balances and those who did not run a household budget (Chicago Tribune, December 21, 2008).

In the News


World of Consumer Payment Trends Continues Evolution as Credit Card Usage Falls and Online Payments Surge

New York, March 29, 2010 Though cash remains king in post-recession America, the world of payments continues to change as consumers back off checks and credit cards, debit cards move toward saturation, online payment options proliferate, and contactless payments and mobile payments move closer on the horizon.

Currently, 54% of U.S. adults cite cash as their preferred form of payment, according to market research publisher Packaged Facts in Consumer Payment Trends in the U.S., which relies primarily on data compiled by Experian Simmons’ Spring 2009 adult consumer survey.  Meanwhile, 68% of American adults have a debit card in their wallet and 67% have a credit card; though only 53% of adults may be considered active credit card users with transactions in the last thirty days.

Fear of the vicious cycle of debt associated with credit cards, in addition to consumer frustration brought on by the aggressive efforts by many credit card companies to squeeze more profits from their customers since the onset of the recession, have resulted in stagnant ownership and fewer transactions. The report reveals that the falling percentage of consumers who have used their credit cards in the last twelve months indicates that more people are keeping their accounts open for emergency purposes only while opting to use the equally convenient—and still popular—debit card instead.

More than half of American adults still pay bills with checks due to the security checks offer when sending payments through the mail and because they don’t expose consumer accounts to the electronic vulnerabilities that can be exploited by high-tech thieves. Nevertheless, the time-consuming disadvantages of checks appear to be outweighing the advantages, especially as Americans turn increasingly to electronic forms of payment.

“The two minutes required to process a check simply can’t compete with the contactless credit cards in development that require two or three seconds to complete a transaction,” says Don Montuori, publisher of Packaged Facts. 

Online payments are benefiting from the shift toward electronic forms of payment, and in many ways they are also helping to drive that shift.  Last year, 27% of U.S. adults—61 million people—paid their bills online, a testament to both the robustness of online payments and how quickly Americans have taken to it as a viable payment option.

Contactless payment has had the fastest deployment of any emerging payments technology. Since mid-2005, leading financial issuers have placed tens of millions of contactless credit and debit cards and devices into the hands of consumers worldwide.  The future for contactless payment will be the industry’s ability to convince consumers the new payment form improves on existing ones.

Consumer Payment Trends in the U.S. examines consumer payment forms of all kinds, including credit cards, debit cards, gift/prepaid cards, cash, checks, online payment and emerging forms, with a focus on how consumer preferences have changed during the past five years and vis-à-vis the economic downturn and recovery.

About Packaged Facts - Packaged Facts, a division of MarketResearch.com, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products.  Packaged Facts also offers a full range of custom research services. 

 

  • Executive Summary
    • Scope of Report
    • Methodology
    • Check Remains Most Popular Form of Bill Payment
      • Table Mode of Bill Payment, 2009 (percent of U.S. adults and number in millions)
    • Debit Cards Lead in Non-Cash Transactions
    • Electronic Payment Share at 63%
    • Government Study Confirms Market Directions
    • Cash: Still Preferred by Over Half of Adults Making Purchases
    • Checks: Also Still in Use by Over Half of Americans
    • Credit Cards: Over Half of Americans Are Regular Users
    • Debit Cards: Popularity Still Rising, But at Slower Rate
    • Gift Cards, Prepaid Debit Cards, and Money Orders
    • Online Payments
    • Spending Attitudes and Economic Sentiment
    • A Stuttering Recovery
    • Economic Downturn Dampens Americans' Sense of Financial Security
      • Table Percentage of U.S. Adults Who Agree or Disagree with the Statement: "I Feel Secure Financially," 2004-2009
    • Attitudes Toward Economy and Individual Financial Situation
    • Financially Secure Big on Credit, Checks
    • Financially Insecure Lean Toward Money Orders, Debit
  • Market Overview - Highlights
  • Market Overview
    • Introduction
      • Scope of Report
      • Methodology
    • Payment Trend Overview
      • Check Remains Most Popular Form of Bill Payment
        • Table Payment Preferences in the U.S., 2009 (percent of U.S. adults and number in millions)
        • Table Mode of Bill Payment, 2009 (percent of U.S. adults and number in millions)
      • Debit Cards Lead in Non-Cash Transactions
      • BAI/Hitachi Study Places Electronic Payment Share at 63%
      • Government Study Confirms Market Directions
      • Cash: Still Preferred by Over Half of Adults Making Purchases
        • Table Percentage of U.S. Adults Who Agree with the Statement: "I Often Prefer to Pay Cash for the Things I Buy," 2004-2009
      • Checks: Also Still in Use by Over Half of Americans
      • Credit Cards: Over Half of Americans Are Regular Users
        • Table Credit Card Ownership and Usage: By Frequency, 2004-2009 (percent)
      • Debit Cards: Popularity Still Rising, But at Slower Rate
        • Table Debit Card Ownership and Usage, 2004-2009 (percent)
      • Gift Cards, Prepaid Debit Cards, and Money Orders
      • Online Payments
    • Spending Attitudes and Economic Sentiment
      • The Villains of the Crisis
      • A Stuttering Recovery
      • Economic Downturn Dampens Americans' Sense of Financial Security
        • Table Percentage of U.S. Adults Who Agree or Disagree with the Statement: "I Feel Secure Financially," 2004-2009
      • Attitudes Toward Economy and Individual Financial Situation
      • Financial Situation Sentiments by Demographics
      • Age
      • Race
      • Income Levels
      • Education
      • Geographic Region
      • Marital Status and Children in Household
      • Impulse Shoppers and Informed Consumers
      • Consumer Financial Outlook Impact on Payment Preferences
      • Financially Insecure Lean Toward Money Orders, Debit
      • Responsible Spenders
      • Poor Savers and Careless Spenders
      • Confident Consumers
        • Table Payment Forms by Level of Consumer Confidence: Low vs. High, 2009 (index)
    • Payment Preferences by Demographics
      • Age
        • Table Likelihood of Preferring Payment Forms: By Type and Age Group, 2009
      • Young Adults and Teens Picking Up Plastic
      • Gender
      • Race
        • Table Likelihood of Preferring Payment Forms: By Type and Race/Ethnicity, 2009
      • Geography
      • Education
        • Table Likelihood of Preferring Payment Forms: By Type and Level of Educational Attainment, 2009
      • Income
        • Table Likelihood of Preferring Payment Forms: By Type and Household Annual Income, 2009
  • Cash - Highlights
  • Cash
    • Introduction
      • Cash Is Elemental
      • Almost $800 Billion of U.S. Cash in Circulation
      • Older and Less Wealthy Americans Prefer Cash
        • Table Cash Usage for Purchases or Bill Payment by Demographic, 2009 (index)
      • Cash Preferred by Both Financially Secure and Insecure
        • Table Cash Usage for Purchases or Bill Payment by Level of Financial Security, 2009 (index)
      • Cash's Popularity Difficult to Gauge
      • ATM Transactions Declining
      • Blame It on Debit Cards
      • Traveling Away from Cash
      • "Cash Only" Signs and Cash Discounts
      • A Second Coming of Cash
      • Turning to Cash in Hard Times
      • Calls to Redesign the Dollar
  • Checks - Highlights
  • Checks
    • Paper Checks Holding Out in Digital Age
      • Table Number and Value of Checks Collected by Federal Reserve Banks, 1920-2003 (in millions of dollars and numbers)
    • The Fed's Role in Check Processing
    • Electronic Checking Through ACH
      • Table Percentage Share Distribution of Non-Cash Payments: By Type, 2003 vs. 2006
    • The Demographics of Check Writers
      • Table Check Usage by Demographic, 2009 (index)
    • Responsible Spenders Use Checks
      • Table Likelihood of Check Usage by Financial Attitudes, 2009 (index)
    • Checks Rare in the Retail Environment
    • Overdrawn Checking Accounts a Cash Cow for Banks
    • The Unbanked Rely on Check-Cashing Outlets
    • Looking Ahead: Digitalizing Deposits
  • Credit Cards - Highlights
  • Credit Cards
    • The Rise of the Credit Card
    • Plastic Is Prevalent
    • Cards Cram the Wallet
    • Credit Cards for Everyone
    • Top Credit Card Demographics
    • One-Quarter of Americans Use Credit Cards for Bill Paying
      • Table Credit Card Ownership, Usage in Past 30 Days, and Usage for Bill Payment: By Demographic, 2009 (index)
    • Cardholders Consider Themselves Financially Astute
      • Table Likelihood of Credit Card Usage by Financial Attitudes, 2009 (index)
    • Carrying a Balance
    • Credit Trumps Debit for Pricey Items
      • Table Preferred Payment Form by Spending Category: Credit Card vs. Debit Card, 2009 (percent)
      • Table Purchasing and Spending Expectations Among Credit Card Owners: Overall and Users in Past 30 Days, 2009 (index)
    • Reward Cards Approaching 100%
    • But Rewards Less Rewarding for Issuers and Consumers
    • The Shift Away from Credit
      • Table Percentage Share Distribution of Non-Cash Payments: By Type, 2003 vs. 2006
      • Table Revolving Consumer Debt: 2004-2009 (in billions of dollars)
    • Behind the Disenchantment with Credit
    • "Evil, Thieving Bastards"
    • Punctured Profitability
      • Table Return on Assets: Large U.S. Credit Card Banks, 1986-2008 (percent)
    • New Legislation Will Restrict Credit Card Industry
      • Table Key Provisions of the Credit Card: Accountability, Responsibility and Disclosure (CARD) Act of 2009
    • Income from Interchange
      • Table Changes in Visa and MasterCard Domestic Credit Card Interchange Fee Rates, Numbers, and Average Rates, 1991-2009
      • Interchange Under Attack
    • Security a Concern
    • Looking Ahead
      • End of Excess
      • Returning to Charge Roots
      • Shifting Fees, Diluted Rewards
  • Debit Cards, Gift Cards and Prepaid Debit Cards - Highlights
  • Debit Cards, Gift Cards and Prepaid Debit Cards
    • Debit Cards
      • Debit Cards Push Out in Front
        • Table Percentage Share Distribution of Non-Cash Payments: By Type, 2003 vs. 2006
      • Recession Driving Even More Americans to Debit
      • Visa Dominates Debit
      • Debit Disadvantages for Consumers
      • Rise in Debit Card Ownership
        • Table ATM/Debit Card Ownership and Frequency of Usage, 2004-2009 (percent)
      • Debit Card Demographics
        • Table Likelihood of Debit Card Usage by Demographic, 2009 (index)
      • Heavy Debit Users Feel Financially Insecure
        • Table Likelihood of ATM/Debit Card Ownership and Usage by Financial Attitudes, 2009 (index)
      • Rewards Programs Expected to Grow
      • The Tug-of-War Between PIN and Signature Debit
      • Consumers' Stance on PIN and Signature Debit
      • Cascading Overdraft Fees
        • Table Percentage of Consumers Preferring That Debit Card Be Declined If Account Overdrawn: By Transaction Amount, 2008
      • Clamping Down on Overdraft
    • Gift Cards
      • Growth of the Gift Card
      • Size of Gift Card Market
      • Gift Cards Have Fallen from Their High
        • Table Gift Card Purchasing in Last 12 Months: Overall and by Type and Brand, 2009 (percent)
      • But Gift Cards Still Advancing
      • Gift Card Drawbacks
      • Overspending or Not Spending at All
    • Prepaid Debit Cards
      • Prepaid Lifts Off
        • Table Prepaid Card (Not Gift Card) Purchasing in Last 12 Months: Overall and by Brand, 2009 (percent)
      • The Plusses of Prepaid
        • Table Very Important Reasons Consumers Choose Prepaid Debit, 2009 (percent)
      • The Prepaid Population
      • Funded by Fees
      • Secondary Banking System
      • Prepaid in the Public and Private Sectors
      • Payroll Cards
    • Looking Ahead
      • Debit on a Roll
      • Prepaid Well-Positioned
      • Decoupled Debit Looking for Traction
  • Online, Alternative and Emerging Payment Forms - Highlights
  • Online, Alternative and Emerging Payment Forms
    • Online and Alternative Payments
      • Introduction
      • Online Bill Pay Catches on Quickly
      • Demographics of Online Bill Pay Users
        • Table Online Bill Pay Usage by Demographic, 2009 (index and number in millions)
      • Alternative Payments Butt Heads with Cards
        • Table Percentage of Transaction Volume: By Internet Payment Vehicle, 2005 vs. 2008 (in billions of dollars and percentage of transaction volume)
      • PayPal
      • Google Checkout
      • Amazon Payments
      • Bill Me Later
      • eBillMe
      • Zong, Boku, and Kwedit
      • RevolutionCard
    • Contactless Cards and Mobile Payments
      • Payments Without Contact
      • Contactless Not Connecting
      • Trends in Mobile Payments
      • Security Worries
      • Growing Interest
      • Awaiting a Breakthrough
      • Mobility Versatility
      • Peer-to-Peer Payments Going After Cash
      • Obopay
      • Eyes on the iPhone

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