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Move over cash: Plastic cards are now king of the world

Eli Blumenthal
USA TODAY
The popularity of plastic is on the rise worldwide.

When it comes to making payments there is a new king in town, and it's plastic not paper.

In new research released Tuesday by Euromonitor International, payments made using credit, debit, charge and other cards will overtake cash payments worldwide for the first time in 2016, registering $23.1 trillion in consumer spending compared with cash's $22.6 trillion. Both numbers are up year over year, with card spending rising from $21.4 trillion globally and cash spending up from $21.8 trillion.

“This stagnant growth of cash payments signals a shift ... and is a major victory for card and electronic payments,” said Kendrick Sands, senior consumer finance analyst at Euromonitor International, in a press release.

What does the switch from cash to credit and debit mean for consumers? While they need to stay in control of their debt and watch out for interest costs and fees, there is a possible benefit, notes Michelle Evans, digital consumer manager at Euromonitor. Consumers can more easily monitor their budgets, particularly with debit cards, which don't require the same monthly payments as credit cards.

"Debit is the payment card that is most like cash," Evans says, "so if consumers like to use cash as a way to monitor their budgets, then debit is the best vehicle for that."

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It would appear that consumers agree, because it was a big year for debit cards. The number of cards in circulation jumped 8.1% to roughly 10.1 billion cards, according to Euromonitor. Credit card circulation also rose, but not by as much, up 5.3% globally year over year to 2.7 billion cards. In China, 65% of card payments were made by debit, with more than 5.4 billion cards in circulation. By comparison 35.7% of card payment spending in the U.S. this year was done via debit card, with 454.9 million cards in circulation.

Consumers' growing penchant for online shopping is strengthening the trend toward plastic. A study released in June by UPS and research firm ComScore found that 51% of U.S. purchases were made online, up from 48% in 2015. Debit and credit cards, of course, are required for making purchases online, but also when using mobile wallet apps such as Apple Pay, Samsung Pay and Android Pay.

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For Millennials, debit cards are particularly important. Only a third of Millennials even own a credit card, according to a 2016 survey by Bankrate.com. Debit cards come in handy for apps such as Venmo or Square Cash to send money between friends — something referred to as peer-to-peer payments.

"Certainly Millennials are a very important generation," Evans says. "They control 30% of gross income as of 2015. If you also factor in Gen Z (those born after Millennials) they are going to control close to 50% by 2025. So, obviously, this is the up-and-coming generation. The up-and-coming generation tends to be the generation that adopts any sort of new technology, and new payment methods certainly fall under that umbrella."

Follow Eli Blumenthal on Twitter @eliblumenthal

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