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Cash no longer king in retail

By Claes Bell · Bankrate.com
Wednesday, June 6, 2012
Posted: 4 pm ET

Plenty of readers may scoff when I bring up the idea of cash being in decline, but you can't deny the trends.

A new report by Javelin Research shows cash is no longer the most used form of payment at U.S. retailers and predicts it will decline further over the next five years.

Instead, debit cards, despite an alleged industry attempt to kill them, hold the largest share of retail point-of-sale payments at 31 percent. Credit cards are now in second place with 29 percent, and cash is in third with 27 percent. Cash's share is likely to fall even accounting for just 23 percent of purchases in 2017, according to the report.

Mobile point-of-sale on the other hand, often referred to as a "mobile wallet," is poised for big growth, with the volume of purchases made that way expected to grow to $1.4 billion by 2017. Every consumer advocate's favorite, the prepaid debit card, is also slated to grow, with total volume expected to grow from about $102 billion to about $139 billion five years from now.

Overall, I'm a little surprised. You'd think mass unemployment and a financial crisis would mean more people using cash, since I'd assume many Americans lost access to credit cards and even checking accounts due to financial hardships.

Still, this is a good thing overall. Electronic dollars are much harder to steal, destroy or lose than cash, are faster to deal with at the register, and don't involve wasteful, useless physical pennies.

That being said, cash has the advantage of being free of the many fees and conditions that often eat away at consumers' bank balances and boost their credit card bills. As a greater share of consumers switch to using plastic or even mobile phones to make point-of-sale purchases, clear fee disclosures and consumer protections will become even more important.

What do you think? Which is better, cash or plastic? Do you foresee a day when cash is obsolete?

Follow me on Twitter: @ClaesBell.

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