Posted on: Sunday, January 4, 2004

Customers prefer electronic payment

By S.P. Dinnen
Des Moines Register

That cashless society we've been hearing about for decades edged a bit closer to real time with the recent news that electronic payments now are the consumer's preferred choice for making payments in stores.

That tidbit from the American Bankers Association didn't surprise Phillip Wong.

"I use (credit cards) for all my stuff," said Wong, of Johnston, Iowa. "This makes it so convenient."

Debit and credit cards accounted for 52 percent of in-store purchases studied by the banking trade group and Dove Consulting. That leaves checks and cash with 47 percent (other forms of payment such as prepaid cards make up the remaining purchases). That compares with 57 percent who used checks and cash as a means of exchange as recently as 1999.

Debit cards in particular have been growing in popularity, according to the report. Barely a blip just a half dozen years ago, they now account for 31 percent of in-store purchases.

Wong would use his debit card, too, if only it hadn't conked out for technical reasons. Regardless of which piece of plastic he pulls from his wallet, Wong said it beats cash or checks.

"Almost every single place accepts credit cards," he said. "Not to mention that you can't shop online with cash."

At Christian Photo in Urbandale, Iowa, store owner Dick Christian said he's amazed at how many young people are using credit cards. And he said customers of all ages seem much more willing to proffer a credit card — using them to pay for everything from $4 battery packs to $8,000 lenses.

"It's almost like people don't carry money anymore," said Christian.

Christian figured that two-thirds of purchases at his store are put on a debit or credit card. Some of that credit usage may be because of the high cost of some of the store's merchandise. But Christian said a lot stems from a tempting carrot that credit card companies dangle in front of consumers' noses:

"Free mileage," he said of free flights that airlines offer users of cards they back.

Or free hotel stays, said Dale Burman of Boone, Iowa. Burman and his wife, Mary Ellen, paid for holiday gifts with a combination of checks and a credit card that's tied into a national hotel chain. The more you charge, the closer you get to free stays at swanky resorts.

The trick to avoiding debt Hades with credit cards is to be careful about what you buy, and how you pay it off. Wong, for one, said he tries to be responsible and is working with a budget to pace his expenses.

But many people cast financial caution aside, at least for a while, during the holiday buying binge, says Jan Davis. She is president of Truecredit.com, an online service that sells credit information and advice.

Come this month's statement, they may be singing a different tune. But to head off post-holiday money woes, she suggested that consumers establish a budget of what they're willing to spend.

Davis suggested that consumers also check their credit cards or store billing statements this month to make sure that all transactions are accurate. As a general rule, she said the score could suffer if a consumer has run up bills on a credit card that total more than 50 percent of his or her credit line.