Debit Cards Overtake Cash as the Most Popular Payment Type, According to Fed Diarists

The growing popularity of debit cards and the displacement of cash by card and electronic payment alternatives is nothing new, but a Federal Reserve banks’ report released Thursday shows debit cards for the first time have surpassed cash as the most-used payment type.

The findings come from the 2018 Diary of Consumer Payment Choice, the fifth in an annual survey overseen by the Federal Reserve banks of Atlanta, Boston, Richmond, Va., and San Francisco. The research draws on a nationally representative panel of consumers who record all their purchase and bill-pay transactions and amounts over several days. The year’s group included 2,873 participants who recorded transactions for at least four days in October.

“In October 2018, consumers made more payments with debit cards than with any other payment instrument (28% of payments),” the survey report says. “Cash, in all prior diary years the most-used payment instrument, followed with 26% of payments. Together with credit cards (23%), these instruments accounted for slightly more than three-quarters of the number of payments.” 

On average, U.S. adults made 43 payments for the month (rounded, 34 purchases and 10 bill payments), up by two from 41 in 2017 but still lower than the 46 researchers found in their 2016 survey. While debit cards led in usage last year, six of nine payment types analyzed had higher dollar values.

Respondents made an average of 12.2 debit card payments with an average value of $53. Next, in descending order of transactions followed by average amount, were cash, 11.2 and $21; credit cards, 10 and $55; payments using bank-account numbers, 2.4 and $261; checks, 2.4 and $266; online-banking bill payments, 2.3 and $349; other (including PayPal, account-to-account transfers, and mobile payments), 1.6 and $241; prepaid cards, 1.1 and $48, and money orders, 0.1 and $446.

Consumers made an average of 12 payments per month in cash in 2017, and the researchers say the decline of one transaction found in the 2018 survey is statistically significant. Three payment types—debit cards, credit cards, and online-banking bill pay—showed statistically significant average increases over the year, rising by 1.3, 1.6, and 0.6 transactions, respectively.

The researchers also said 24% of all payments in 2018 were made using electronic devices—computers, tablets and mobile phones. Of those, one-third—8% of all payments—were made using a mobile phone.