Most holiday shoppers plan to pay in cash

Many U.S. holiday shoppers will be making a pit stop before hitting the stores: A trip to the ATM.

Cash will be the most popular payment method for shoppers buying holiday gifts, with 39% of Americans saying they plan to use it for most of their holiday purchases, in a recent survey of 1,000 shoppers personal finance website Bankrate conducted with Princeton Survey Research Associates International. This number was about the same as in 2014, when 38% of holiday shoppers said they planned to use cash.

Behind cash, the most popular choices for payment were debit cards, with 31% saying they would pay this way, followed by credit cards (22%) and checks (3%).

Younger shoppers were especially unlikely to use credit cards; 48% of millennials said they would do most of their holiday shopping with debit cards, and 36% said they preferred cash. Mobile payments are still unpopular; only 14% of U.S. adults with smartphones or similar devices plan to make even one mobile payment during the holiday season, according to Bankrate.

The preference for cash seems to be a result of shoppers not wanting to overspend, said Mike Cetera, a credit analyst at Bankrate.

“People don’t want to overextend themselves when they’re out shopping,” said Avivah Litan, a security analyst at Gartner. “They’re thinking, ‘I don’t want to spend more than I have and get carried away.’” In fact, those surveyed who were higher earners, with household incomes of $ 75,000 a year or more, were more likely to use credit cards than those with lower incomes, Cetera said.

Typically, debit card spending outpaces credit card spending for that reason, Litan said.

Mobile payment: Going cashless in China

In China, mobile payment has become a part of people’s everyday lives. WSJ’s Menglin Huang spends a day without cash in the southern city of Shenzhen.

Millennials in general tend to avoid credit cards more than previous generations have done; 63% of millennials don’t own a single credit card, according to a separate Bankrate survey in 2014. “They grew up in the Great Recession and saw what happened with their parents,” Cetera said. “They don’t ever want to be in a situation where they’re in debt. They’re shying away from high-interest loans, essentially.”

Security may be another concern; in the last several years security breaches have affected shoppers at stores including Home Depot HD, +2.64%   and Target TGT, +0.40%  .

Still, consumers should be aware that credit cards, in addition to allowing users to build credit, actually offer more protection than debit cards when security is compromised, said Sean McQuay, a credit card expert at NerdWallet. Many credit cards are now outfitted with security chips that debit cards don’t have. And depending on how long it takes consumers to report fraud on a debit card, they might be charged more for their liability than they would be with a credit card.

Plus, when shoppers pay with debit cards (or a wallet full of cash, which is at risk of being stolen or lost and never recovered), they might miss out on credit-card rewards, such as cash back, miles or the most underused credit card perk, price protection.

A holiday season when shoppers prefer mobile payments is most likely at least three to five years away, Litan said, because there still isn’t enough incentive to use this method. Mobile payment is no more convenient than a credit or debit card yet, McQuay added, because shoppers still need to carry around their wallets for other reasons. “Until all the things we carry in our wallets are digitized, there’s no benefit,” he said. – Top Stories

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