Cashless Society: Cards Now Dominate Retail Payments

Feb 24, 2025 • 15 min read

Cards Overtaking Cash The U.S. is steadily moving toward a cashless retail environment. Credit and debit cards today account for the majority of consumer transactions by number. In a recent Federal Reserve survey, over 60% of monthly payments were made with cards (credit 32% and debit 30%), while cash fell to just 16%​. This marks a significant shift from past years when cash was more prevalent – even for small purchases under $25, cards have now surpassed cash as the preferred payment method​. The growth in card usage has been explosive; from 2018 to 2021, the surge in card payments contributed over 84% of the growth in all non-cash payments in the U.S.​. This trend has only accelerated with pandemic-era changes (like contactless payments and e-commerce), further entrenching cards (and digital wallet transactions linked to them) as the default way consumers pay for goods.

Implications for Retail With credit and debit cards dominating transactions, retailers are handling far more electronic payments than cash. This means richer data trails per transaction and opportunities for analytics (since each card swipe carries information about amount, merchant, time, etc.). It also means retailers and analysts can observe consumer spending almost in real time via card networks. The shift to cards has thus laid the foundation for new retail analytics methodologies that leverage payment data to gauge sales performance quickly and accurately. In essence, cards have become the pulse of retail spending, providing a window into consumer activity that was not possible in a cash-heavy world.

Different Payment Methods, Different Consumer Behaviors

Consumers don’t just change how they pay – their spending behavior shifts depending on the payment method. Research has uncovered clear differences in how people spend with cards versus cash:

• Higher Willingness to Spend with Credit: Studies show that paying by credit card often leads to higher spending and impulse purchases compared to cash. The reduced “pain of paying” with a card (no physical money leaving your hand) can “step on the gas” of spending​. For example, neuroscience research at MIT found that credit card use actually stimulates reward centers in the brain, encouraging consumers to buy more or choose higher-priced options than they would with cash​. It’s not just removing friction – using credit can create a craving to spend, contributing to overspending and debt for some consumers​.
• Debit vs. Credit (Budgeting vs. Borrowing): Debit cards draw directly from one’s bank account, so they tend to function like a “digital cash.” Many consumers – especially younger or budget-conscious individuals – use debit to avoid accruing debt. This can make debit card users more restrained in spending than credit card users, more mindful that each purchase reduces their checking balance. Recent trends show younger and lower-income shoppers gravitating toward debit (often via mobile wallets) and even cash, in an effort to control budgets amid economic uncertainty​. Credit cards, meanwhile, are often reserved for larger or necessary purchases (or to earn rewards), with higher-income consumers using credit most frequently​. In short, credit cards encourage purchasing, while debit can impose a subtle self-limit – though both are more convenient than carrying cash.
• Cash’s Role: Cash still plays a role for certain demographics and small transactions, but its influence is waning. Older consumers and lower-income households rely on cash more than others (for instance, households under $25k income made 32% of payments in cash, versus only 11% for those over $100k​). Cash can serve as a hard limit on spending (you can only spend what’s in your wallet), so people paying cash often make more deliberate purchase decisions. However, the convenience of cards and ubiquity of card acceptance – now even for micro-payments – means fewer opportunities where cash is truly necessary. Notably, 2023 was the first time cash was not the top choice for purchases under $25​, indicating consumers now reach for cards even for coffee or quick bites.

Consumers 55 years and older are around 1.5 times more likely to use cash than consumers below 55

The generational gap in cash use has become more evident after the pandemic. Adults who are 55 years or older used cash for 22% of their transactions, while those aged 25 to 54 used cash for only 12% of their purchases. Alternative payment methods have driven the decline in cash payments since the pandemic

The Federal Reserve reports that the decline in cash payments after the pandemic is not because of consumers’ waning preference for cash, which was already in a steady decline. Rather, it is primarily driven by the rise of available remote or online payment alternatives.

The average number of cash payments has remained steady since 2021 at 7 cash payments, but the average number of total payments increased from 36 in 2021 to 46 in 2023. This means consumers are using cash just as frequently but are making more payments in other forms as well. 58% of adult Americans make it a point to have cash on hand

In Pew Research Center’s latest report, six of 10 adults still regularly carry cash on average. Those aged at least 51 carry the most, with up to 71% keeping cash in their pockets. Additionally, the dollar value of cash consumers carry averaged $73 in 2022—registering a $5 increase from 2021.

92% of consumers will continue to use cash in the future

Of the total number of US adults interviewed, 92% say that they have no plans to discontinue using cash as a payment method. Only 1% expect to stop using cash in the next two years, while 5% say they no longer use cash to make purchases.

82% of all US adults had a credit card in 2023

Rewards and cash-back programs are the most popular reasons for increasing spending for nearly 15% of US credit card holders

The same US credit card spending data show that 14.9% of credit card holders increase their spending to earn rewards and cash back. Of all the credit card’s value-added features, 30% favor rewards and cash back over tracking and managing features such as transaction monitoring, autopay, and mobile apps. Credit card payments are preferred across all age groups Preference for using cash is highest for consumers aged 55 and above at 22%, while credit card payments reach up to 35% for consumers aged 25-54. The difference between the range of cash and credit card use reflects the overall popularity of credit cards as a payment method vs cash.