Cash or plastic? When members of Generation Y are asked this point-of-sale (POS) question, they are more likely to choose plastic, but not necessarily a credit card. According to research by PSCU, a payment processing provider for American credit unions, older members of the Millennial Generation, those who are between the ages of 31 and 38, tend to prefer debit card payments over lines of credit by a margin of 40% versus 36%.
Credit vs. Debit
The PSCU survey shows that paying with credit is more popular among members of Generation X, but things get interesting with younger members of the Millennial Generation, those who are between the ages of 23 and 30, who happen to prefer credit at an even higher rate than their Generation X counterparts. The youngest in the Millennial Generation cohort are evenly split in their credit over debit cards preferences at 29%; they actually prefer to make payments with cash, but instead of bills and coins they really like digital platforms such as Venmo, Google Wallet, Snapcash, PayPal, Facebook Messenger, and others. These young consumers, who are between the ages of 18 and 22, really like the idea of doing away with plastic and using their smartphones, which suggests that they are the perfect segment for digital currencies.
Young adults who are part of the Millennial Generation may not always realize that the payment processing structure of their beloved digital wallets are actually debit cards, but this is not something they worry about; they do not like carrying plastic cards and only keep a small amount of cash on hand just in case. They understand the concept of credit over debit, and this is probably why they prefer the latter; when they learn about the struggles many of their parents went through when revolving consumer credit was widely available, they prefer not to bother with this aspect of personal finance.
What Should Credit Card Companies Do?
Other personal finance research studies on the payment patterns of the Millennial Generation shed light on another aspect of credit and debit cards that young adults dislike, specifically data breaches. Such security issues are being considered by younger consumers, but there is also a certain aversion to the traditional banking system. It should be noted that a little over 25 percent of younger Americans have never used a credit or debit card, they think that checks are antiquated, and they dislike the idea of having to stand in line at the bank. They don’t mind using prepaid cards, which are another form of debit cards, as long as they are tied to mobile apps and have a disposable feel to them.
What should banks and issuers of payment cards do to entice the Millennial Generation? Mobile apps and innovation are clearly the answer, and they should start looking into digital currencies, perhaps beginning with safer options such as the USDC managed by investment banking giant Goldman Sachs. Something else to keep in mind is that younger consumers like rewards, social media features, and the ability to instantly transfer small amounts of cash.