Are You Secretly Overspending? Your Payment Habits Can Tell You

We have drastically changed the ways we pay. Seldom will you find anyone writing checks or paying lumpsum cash. On a closer look, the Payment Habits of Americans are changing big time. Now, we may explore deeper to discover the common trends in Payment Habits.

A recent study on consumer spending habits among US citizens reveals something interesting. Primarily, we want faster payment options. The fact that 51% of Americans use contactless payments as their preferred means proves the same¹.

However, Americans prioritize payment security, too. That’s why the US is not among the frontline nations adopting contactless payments. At least their Credit Utilization Ratio says so. 

Few studies reveal that cash payments don’t occupy the center stage anymore. Broadly, 22% of Americans use the mode of cash exchange quite often. Another 14% say that cash is their preferred payment option².

Meanwhile, 70% of people depend heavily on card payments. 

Alongside discussing emerging trends, we may also scout the effect of the changing trends on our economy and personal finance. 

The Four go-to Payment Options

After witnessing a whacking change in how people pay, it’s time to discover the most preferred payment options.

Cash

Well, despite innovations, cash isn’t dead yet. Many thinks Managing Existing Credit is easier with cash.  

It’s still one of the prominent Payment modes. But that doesn’t imply that Payment Habits haven’t changed. 

³The latest data reflects that only 30% of people in the US use cash regularly. 

Why Do People Prefer Cash?

Paying in cash has been one of the dominant Payment Habits for a long time. But that’s not why people still cling to cash.

But most avid cash payers’ comment that it helps them keep their finances in check. 

When you pay by cash, you always monitor the amount spent. 

In other words, paying $50 out of a reserve of $500 keeps ticking in your mind. 

So, what changes when electronic payments come to the scene?

With these newly acquired Payment Habits, our ability to watch over our recurrent payments has been unlatched.  That’s why Credit Monitoring Services may help.

Digital Wallets and Other Electronic Means 

Despite critiques and cross-POVs, electronic payments are gaining ground now more than ever. 

Almost all average Americans now use at least one mod of electronic payment. However, digital wallets got the better of us.

To clarify, everybody uses wallets like Apple Pay, PayPal, or Google Wallet. In the same vein, a survey finds that 59.6% of the US people use at least one of these wallets in a month⁴.

Wallets offer easy micropayments. Again, that’s a leverage for additional and unnecessary expenses. Hence, many people in the US are in debt. To solve the issue, there are various Debt Management Strategies in place.

Debit and Credit Cards Dominate the Market

Among many options available, 66.6% of Americans still rely on debit cards to make every POS payment. Another whooping 51.4% use credit cards for that.  Due to heavy transactions, they may have a complex credit history too. 

The maxim- “America runs on Credit” is true, after all. Some people use credit cards for everyday use. While another population uses secured credit cards for Building Credit from Scratch.

On one hand, credit card helps them Rebuilding Credit from scratch. On the other hand, it may disrupt their credit behavior more.

Moreover, people are quickly adapting to other modes of electronic payments, too. 

Here’s a quick summary of the preferred electronic payment options, reflected by the Payment Habits of Americans. 

(Source: https://banked.com/articles/the-shifting-landscape-of-digital-payments-us-consumers-demand-choice)

Why Do So Many People Prefer Electronic Payments?

Most people’s payment habits now revolve around convenience. In the same vein, 85% of Americans now say that all utility bills should come with a QR. 

So, they can scan the custom QR code for a one-time payment. And the payment will be done from their phones or smart devices, in a jiffy.

Subsequently, banks respond to what they want to. Most cluster payments have a streamlined gateway. Meanwhile, the manual input required for a fee is steadily decreasing. 

Are Baby Boomers Like ACH and E-wallets Still Relevant?

Of course, they are. ACH transfers are the exchange of funds from bank to bank. In other words, the funds are deducted from the sender’s bank and deposited to the receiver’s bank account.  

Banks use a separate ACH network. So, ACH transfers are cheaper than standard bank transfers. 

However, ACH payments are an excellent way to make recurring payments. For instance, you are paying your monthly bills. It is also helpful for subscription payments. 

So, you may set up auto ACH transactions for your monthly Amazon Prime account without much hassle. 

That’s the convenience people want. 

Many small businesses use ACH transactions for recurring payments like monthly salaries.

But are E-checks as Relevant?

I can’t say so, sadly. But they are certainly relevant. 

E-checks are digitized versions of regular paper checks. They also use the same ACH network for fund transfers. 

With e-checks, the transfer will take 3 to 5 days to complete⁵. So, it’s easy to fathom that people will opt for faster and more convenient electronic payment options. 

Payment Habits Divided By Age

A common notion is that electronic payments are for new-age people. In other words, youngsters prefer electronic payments more.

For the records, it’s true. But gradually, people are becoming more consumed by convenient payment options, irrespective of age. 

For the moment, older people certainly feel traditional payment methods are better. 

At least, a collective trend analysis says the same.  

 Baby boomers may only rely on checks, credit, and debit cards for their payments. That’s why their Credit Mix is streamlined. All others use at least one of the latest technologies to pay. 

For instance, Gen X users (42 to 56 years old) use bank transfers profusely. But they still use cards and checks as much. 

However, millennials stand out and use traditional and modern payment methods.

You will find them using cards, wallets, and bank transfers simultaneously. 

Finally, it comes down to Gen Z. They are different. They prefer wallets and contactless cards. However, cash use is shallow among them. For that, credit reports can track all their transactions.

New Trends Emerge!

We see avid use of online payments and contactless technology. Exclusive payment facilitators like RFID tagging and NFC gateways have changed Payment Habits and trends big time. 

Digital Currencies are More Relevant than Ever

A new age of digital customers is living now. With them, digital currencies like Bitcoin also became mainstream. 

There is no dearth of controversies about cryptocurrencies. But that’s not stopping customers and merchants from using it. 

CNBC reported that 75% of US retailers will accept crypto payments by 2025. If the same happens, financial analysts expect all other trends to fall out of place. 

Crypto will be the primary dominator in the payments market. 

But some think that the sky is still grey!

Until issues like security loopholes linked to regular crypto payments are resolved, it will be challenging to use commercially. 

Gen Z Craves Contactless Payments 

The hype for contactless payments is real. 

Remember scrapping your pockets for change? On days, we have all scrolled our wallets to find the right card to pay, too. 

But we have the leverage now. Contactless payments are here. 

Now, it’s easier than ever to sync your digital debit or credit cards with your mobile wallets.  Just tap on the store’s NFC device or scan the QR code. And enter a short OTP. 

Your payment is done! 

But speed is only part of what contactless payments offer. 

 Indeed, it’s flexible and convenient. At the same time, contactless payments are reliable, too. 

The RFID tagging of contactless cards creates a secure gateway for electronic fund transfer. 

Buy Now, Pay later

Has it ever occurred that you want something from the store badly? But you left your wallet back home. 

Well, it happens to me often. 

But, thanks to Apple Pay’s Buy now-Pay Later option, these situations are no more. 

Some other cards and wallets offer the Buy now-Pay Later option. 

More than 26% of Americans use this payment option frequently in a month. Slowly, it will become one of the mainstream Payment Habits in the US. 

Cashless Payments or Careless Payments 

The bottom line is that hands-free and cashless payments are in the driver’s seat now. But these Payment Habits may bring along concerns too. 

One of the main concerns is overspending. 

A Business Insider study found that 36% of Gen Z overspends on clothing. There’s an endless list to follow.

But Why is this Happening?

 I feel there are two ground causes:

• The availability of so many payment options at our disposal makes it challenging to keep a tab on the money spent
• Secondly, we stopped using cash. So, the immediate prick of conscience isn’t there. 

But the silver lining is that many payment tracking options are available. In other words, all digital wallets come with a payment tracker. They also offer monthly payment summaries and analysis of spending sources. 

You may make an adequate budget by getting help from monthly tracking reports. 

Wrapping Up

Payment Habits encounter disruptive changes. However, no single trend or pattern has dominated the people of the US till now. Card and cash usage is as relevant as e-wallet pay and contactless payments. 

More disruptive tools like crypto coins and Buy Now Pay Later will emerge with time. However, I assessed that all trends have their benefits and downsides. 

If we end up overspending, no payment option is to blame. Our recklessness and casual spending habits should be held responsible.

There is a rich tapestry of payment management in the new age. The versatile Payment Habits allow us to plan our expenses according to our needs.  But we can’t deny that digital payments will take over soon.

For More Financial Article Click Below!!

• Managing Existing Credit: Using The 50/30/20 Rule!
• How I Turned Financial Stress into Financial Success?
• The Impact of Contactless Payment on Cash Usage: Early-Stage Insights

1. https://www.cnbc.com/select/mastercard-survey-contactless-payments/ ↩︎
2. https://www.forbes.com/advisor/business/software/people-twice-likely-spend-using-card-than-cash/ ↩︎
3. https://www.cashmatters.org/blog/usa-30-people-prefer-cash/ ↩︎
4. https://banked.com/articles/the-shifting-landscape-of-digital-payments-us-consumers-demand-choice ↩︎
5. https://www.highradius.com/resources/Blog/what-is-echeck-how-it-works/ ↩︎