Millennials aren't looking to buy the types of things older generations shop for, and they aren't paying for them the same way either. The best way to show your age when shopping? Use cash.
A new survey found that if you pay for your purchases with cash, chances are you are over the age of 30. Americans under 30 years old use plastic as opposed to cash, favoring debit over credit cards.
Those under 30 even use debit cards to make purchases under $5. The survey conducted by Princeton Survey Research Associates International for CreditCards.com found that 77 percent of people over 50 pay for $5 purchases with cash, whereas only 48 percent of people ages 18 to 29 do.
"I think those people mostly use cash because that's the way we've always done it," says Matt Schulz, senior industry analyst for CreditCards.com. "But Millennials have grown up doing things like going to school and using a prepaid card to pay for lunch. For a lot of younger folks, cash is just something that they don't carry around."
Those who graduated from or attended college are 39 percent more comfortable using cards for smaller purchases than the 16 percent who do have higher education experience.
People ages 18 to 29 use debit over credit cards by a ratio of 3 to 1, and all ages prefer debit over credit by 2 to 1, according to the survey out of 983 credit card holders.
But using plastic over cash may not be so smart. Those who use debit cards are not building a credit history. A study published in the Journal of Experimental Psychology in 2008 found that people spend more when using cards. Handing over cash triggers emotional pain that prevents overspending.
Many shops, restaurants and bars require a minimum before they are able to charge your card because merchants have to pay fees when customers use their cards.
"While interchange fees on PIN-based debit card transactions were capped by the Durbin Amendment and typically cost merchants less than fees on credit card transactions, the fees are still significant enough to where merchants are much happier when their customers pay with cash instead of plastic," says Schulz.
This can lead to spending more money, making you susceptible to overdraft fees if you are not careful.
However, debit cards are favored over credit because they work just like cash. The money comes directly out of a checking account. Credit cards are favorable only if you pay off the card in full because when there is a balance, you are stuck paying interest. According to a recent report from the Federal Reserve Bank of New York, Americans had about a half a trillion dollars worth of balances left on their credit cards at the end of June.
The survey also found that Republicans and Democrats both use cash for small purchases. Independents are more likely to use cash, mainly because younger people typically vote independent.
In the future, 18 to 29-year-olds will become more comfortable paying with cash. "As those folks get a little more secure financially, get a little more money in their pockets, they'll start to switch," Schulz says.
The next generation is expected to be even more comfortable using cards and even mobile payments.
