Cash Is King In Low-Income Homes

A report from the Federal Reserve finds cash payments have stayed consistent in recent years, but households of modest means are less likely to use other payment methods.

PREFERRED PAYMENT METHOD BY HOUSEHOLD INCOME
FOR U.S. CONSUMERS | DATA AS OF OCTOBER 2021
© Callahan & Associates | CreditUnions.com

SOURCE: FEDERAL RESERVE
  • A 2022 study from the Federal Reserve — the “Diary of Consumer Payment Choice” — offers clues into consumer payments trends headed into 2023. Most notably, cash usage continues to shift. Cash accounted for 20% of all payments in 2021 — the most recent data available — up one point from 2020 but down from 26% in 2019.
  • Despite that year-to-year stability, cash payments are down 11 percentage points compared to 2016, when they comprised 31% of all payments. Debit card usage and ACH payments have remained relatively stable during the same period, whereas credit card use as a percentage of all payments continues to climb, rising from 18% in 2016 to 28% in 2021.
  • The percentage of consumers using cash for person-to-person payments has also fallen dramatically, from 61% in 2019 to just 49% in 2021. Perhaps not surprisingly, mobile app usage for P2P exchanges nearly doubled in just one year, rising from 15% in 2020 to 29% in 2021.
  • Cash usage continues to be highest among those age 55 and older, a figure that hasn’t changed significantly since 2016, whereas cash payments among younger consumers has generally been on the decline. Cash payments were also more common among consumers in low-income households.
January 2, 2023

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