January 16, 2006
Paper or plastic, kids?
Kids today and their love of plastic.
[Y]oung 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."
I dunno, it seems to me that unless you lug your checkbook everywhere with you, you'll get a pretty full accounting of your spending habits each month when your credit card bill arrives. My dinosaurness comes from not owning nor wanting to own a debit card, but I presume you get a detailed monthly statement of its use, too.
It's cash transactions that are easy to overlook, unless you're the anal retentive kind who writes them all down. I sort of track them on a macro level by being vaguely aware of how often I'm hitting the ATM. More than two or three times a month and I know I'm overspending.
Shameful Confessions Department: My first credit card was a Gulf (now ChevronTexaco) card that I got as a first-year grad student in 1988. I didn't get an honest-to-goodness real credit card until I was 25 years old. That led to a few moments of high comedy on a business trip in 1991 when the hotel at which our firm's marketing manager had reserved me a room claimed not to know who I was - you haven't lived until you've wandered the streets of Los Angeles at 2 AM after a late-arriving flight in search of a cash machine - but it all ended well and I learned my lesson about the value of plastic.
Posted by Charles Kuffner on January 16, 2006 to Society and cultcha
Forget about the end of the month, you can check your balances and purchases online in realtime. There's no reason to keep a ledger because if you're unsure you just hop online for a quick check.
I friggin' hate when company's attempt to annoint my generation anything, especially when it oh-so-conveniently matches up with their interests. If we were rebelling against plastic I doubt they'd have put out a press release.
I am going to be honest. I am a young guy and I spend cash money with zeal. I make nearly all of my purchases with plastic, but I tend to be more cautious with it. Cash in hand equals burned hole in pocket.
Then there's the rent-a-car biz where not only do you need plastic but you'd better be over 25 too. Not that I need to worry about that anymore.
I remember getting hit with a $1 fee for getting $20 out of an ATM in West LA once. After that I decided it was far less expensive to get the cash $100 at a time. At least that cut the transaction cost down to 1% from 5%.
When I was in college, I had a magic gas company credit card. They were just starting to convert all the service stations into gas+convenience stores in Texas and every now and then, when we were low on food and money, I'd go to the convenience store and charge a bunch of (overpriced) groceries to the card. My dad got the bill, but since he worked for the gas company, it was lower than it would have been. Ended up working out well for several of us.
Recently, we had a reason to look over some old check registers from the mid 90s. We were amazed at how many checks we wrote back then compared to today. Now, groceries and most other retail transactions above $12 are done by debit and many bills are on auto-pay. And, that is with us carrying zero consumer debt. Even most candidates and NGOs are now allowing credit cards and/or Paypal through their web sites. We are writing fewer and fewer checks.
I am surprised to hear that you don't have a debit card. It is interesting what technologies we each choose to use.
My dinosaurness comes from not owning nor wanting to own a debit card, but I presume you get a detailed monthly statement of its use, too.
Depends on your bank, of course, but my experience is that the transactions are mixed in with "real" checks on your checking account statement. The details are there, but true credit cards usually have an easier-to-read statement. Some even sort your transactions by category, based on the store.
The big difference is there's no "float" while the Post Office delivers a check. You go online, you make a payment, the money is debited instantly. That can be an advantage or a drawback, depending on your situation.
If you ever need to rent a car, you need a credit card, not a debit card. There's more chance of a debit transaction being turned down, leaving them unpaid and you in a fix, so most car rental cos. won't accept debit cards.
One "nasty" the banks (and even credit unions!) pull is they'll deliberately let you overdraw your account, thus invoking their "automatic overdraft protection," along with the exorbitant fee (usually $20). That's true with checks too, of course, but you'd think that an electronic system could at least warn you about overdrafts. But then of course the banks and credit unions wouldn't get as many $20 fees from their customers' mistakes!
On balance, I prefer a credit card with a reasonably but not ridiculously high limit, which I then pay off each month with an old-fashioned check.