Mighty Bargain Hunter

Generation X … I mean P … I mean …

January 13th, 2006 | by mbhunter |

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P doesn’t stand for Pool … it stands for Plastic. The thin rectangular kind with the magnetic strip on the back.

So sayeth AP on MSN: Gen ‘P’ Leading Credit, Debit Card Charge

Cash is out, and plastic is in. Over half of the purchases by people ages 18-24 are through plastic. Having to carry around cash is an annoyance for some. Though the article claims that “[t]heir [young adults'] habits are driving even more merchants to accept debit and credit cards,” and that the merchants are rebeling against the fees that the credit issuers charge, it still is a pretty easy expense for the merchants to justify. People tend to spend more when they buy with plastic than when they buy with cash.

This is psychological. Using a credit or debit card is so easy it takes effort to remember that you’re actually spending money. On the other hand (aside from five more fingers) there’s something at least a little arresting about pulling out and counting cash when buying something.

I admit that I tend to pull out my Chase PerfectCard™ much more often than I pull out cash. I’ll charge something that costs less than $2 (though my wife won’t let me when I’m with her!) Why? Because if you spend as carefully with credit as when you use cash, and don’t carry a balance on your card, you can take advantage of free use of the money for the grace period, and possibly even get a small rebate. If, on the other hand, you spend more than you should, then cash might be the best alternative.

It’s true that a debit card is more convenient to carry than cash and that it also imposes some spending limits (whatever is in your account or accounts). However, if you get charged for the debit transaction by your bank (because the bank, not the merchant, pays for the debit transaction) then everything will effectively be a little more expensive than if you had paid cash.

Another good point about using plastic (again, if you can use it wisely) is that you get a statement at the end of the billing period with all of the merchant information neatly organized chronologically. Then doing a cost breakdown by spending category is a snap if you have personal finance software. So, although you may not feel the money leaving your coffers as easily at the point of sale than if you had used cash, it’s a lot easier to see where it went than having to wade through receipts.

I suspect that if RFID technology gets super-cheap (which it probably will) then we’ll just walk through the checkout lane while our entire shopping cart is scanned at once and our credit card is automatically charged because our identity was obtained biometrically at the same time. (There was a TV commercial that envisioned this technology, but I can’t remember the company.) How would we ever save anything then? Even the debit card would stay in the wallet!

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