February 25,2009
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News: Is Cash Going the Way of Silver Certificates?
It's not much of a stretch to believe that the average consumer has less ‘buying power' cash since the Bush Administration took over than any time in modern history. Statistics show that, since the Bush election, only 1 out of every 100 wage earners in America was claiming $99 out of every $100 available. That means that the other 99 out of every 100 wage earners had to divide up that $1 remaining, between them all. This may explain the widespread shift from cash to credit cards, because 99% of us have no cash and we still have to live. A recent BAI/Hitachi has been published assessing the latest ‘cash/credit cards/other mediums' directions. Some time ago, credit cards took the lead over check writing. Today things are still in a flux, as we can see.
According to the survey, cash is now on a steep downslide. The indications are that, already 41% of our nation's consumers are not using cash as frequently as two years ago. Of those, almost all have switched to ‘plastic' (97%). Some were gift and prepaid, some were debit but, most were credit cards. Credit cards are so prevalent in our society, in fact, that the average American consumer carries 4 of them in his wallet. Not all four are used every month but, more than half are (2.2, on average).
These averages indicate the presence of a credit card market that delivers a healthy ‘choice level' for consumers. The market has come to gravitate toward stable structures like VISA and MasterCard associations and the ‘big-ten' card lenders. The largest lenders, like Citi and BoA, have captured 75% of the VISA/MC market.
The cards get used. A little over half of the users pay their credit cards off every month (guess they don't like paying finance charges). But, still, almost half of these consumers do carry a balance from month-to-month and, presumably, do pay finance charges (46%). This is not necessarily by choice, however – many are ‘stuck'.
Rewards programs seem to have had some impact here in consumer decisions. Most credit card holders (75%) reported being enrolled in such programs and over half of those had appropriated them (58%). So, this is seen as having significant impact on consumer decisions.