Credit Basics
'G Pen' Leading Credit, Debit Card Charge
BY
Michael Liedtke
Associated Press
01.10.06, 03:53 PM ET
Erica Jostedt loves to shop, but she hates paying with cash or
a check. There's rarely more than $20 in her wallet and she doesn't carry around
her checkbook because she usually needs it just once a month to cover the rent at
her San Francisco apartment.
"I get so annoyed when I go into a place that only takes cash that usually I end
up going somewhere else," she said.
Jostedt, 24, was born in the 1980s, the leading edge of a generation that is shunning
paper payments like no other before it.
These young consumers so consistently reach for debit and credit cards that Visa
USA has anointed the age group "Generation Plastic," or "Gen P."
Their habits are driving even more merchants to accept debit and credit cards, fueling
legal battles over the fees underlying the cards and raising more concerns about
the nation's shriveling savings rate.
Plastic payments - including online commerce - now account for 50.4 percent of the
spending among consumers ranging from 18- to 24-years-old, with cash and checks
making up 41.1 percent of their spending. Consumers 25 to 34 years old spend about
45 percent either way, while everyone older still uses cash and checks at least
half the time, according to Visa, the nation's largest payment network.
"All paper-based payments are in retreat," said David Robertson, publisher of The
Nilson Report, a newsletter that's been following spending trends since 1970. "People
of a certain age don't even know where their checkbook is."
Judy Jostedt, Erica's 55-year-old mother, isn't so sure that's a good thing. Although
she uses debit cards more frequently, Judy still writes about a dozen checks each
month, partly because she feels her canceled checks help her monitor spending.
"I guess I'm a dinosaur," she said. "I worry that kids today don't even know where
all their money is going every month."
As a whole, Gen P isn't using credit cards any more frequently than other age groups,
but depends more heavily on debit cards. Gen P uses debit cards to pay for 28.2
percent of their purchases compared to just 7.1 percent among those older than 45,
according to Visa.
Debit cards - which avoid debt by withdrawing the purchase amount from a consumer's
bank account - were used to pay for an estimated 23.1 billion transactions nationwide
during 2005, surpassing the estimated 20.3 billion transactions paid by credit card,
according to The Nilson Report.
But consumers tend to spend more with credit cards, which paid for an estimated
$1.75 trillion in purchases during 2005 compared to an estimated $872 billion on
debit cards, The Nilson Report estimated.
