As Consumers Turn “Cashless” Financial Literacy is Essential

The financial literacy community is buzzing over the American Consumer Credit Counseling's release of results of a survey they conducted, underscoring the extent to which Americans are choosing to pay with “plastic” over cash, including credit cards, debit cards and loans.  Financial education proponents view these results as a strong confirmation of the heightened need for financial education to combat consumers’ lack of understanding of the many issues that stem from the significant use of credit to pay for everyday products.

Eighty percent of survey respondents indicated that they are using credit and debit cards to buys such daily items as groceries, gasoline and their meals.  Industry observers say that credit cards are a strong catalyst for “impulse shopping” that causes individuals to purchase items that are beyond their budgets, but that appear with their financial means since the buyer does not experience the loss of money in the same direct manner in which they feel the loss of cash.  As a result, consumers are accumulating massive amounts of debt relating to purchases that they truly cannot afford.

American Consumer Credit Counseling (ACCC), a national non-profit focused on empowering consumers to achieve financial health through education, counseling and debt management, found that less than fifteen percent of respondents prefer to use cash over credit.  One of the more startling findings was that 100 percent of respondents ages 18 to 24 indicated that they pay with their debit card, and not cash, when buying their daily household goods.  In today’s 24-hour society, and with the advent of high rates of mobile payment app use, it is now quicker than ever to make purchases without the need for cash.

The results disseminated by ACCC are in line with those published by other organizations surveying the use of credit and debit cards among consumers.  In a major study of consumer payment behavior in 2012, MasterCard found that nearly three-quarters of all Americans indicate that they use less cash now than they did ten years ago. MasterCard also found that some 80 percent of U.S. consumer spending is cashless.

These survey results come at a time when the nation is seeing the many negative consequences of high debt combined with low levels of financial literacy.  College has become increasingly unaffordable to many young people, while college graduates are strapped with more loan debt than they can handle as they try to begin their professional lives.   If the move to a cashless economy continues, the focus on financial education should continue as well so that consumers can understand how to manage their money and avoid the many issues that arise by virtue of significant credit and debit card use.