Financial Services

The King is dead, long live the King.

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The phrase, “Cash is King” no longer applies in my house. The product development and marketing efforts of credit card issuers and operators have worked terrifically on the spending habits and attitudes of those in my household. King cash is dead; at least it is in my household.

This is despite the fact that we were lucky enough to be one of the 110 million cardholders hacked in the latest security breach at Target. But, the news stories that run nightly and the potential billions of dollars lost through hacking incidents haven’t changed our behavior in the slightest, and why should they?

This is the overall sentiment suggested by a new Associated Press-GfK Poll. Fifty percent of participants said they were “extremely concerned” about data breaches and 62 percent said they were now more concerned than previously about shopping on mobile devices.

Even though there is considerable concern, only 37 percent of respondents had sought to use alternative payment methods, such as cash, to reduce the risk of having their data compromised.

The inconvenience of a few random charges that can easily be reversed with a quick phone call, new card and pin in the mail seems little price to pay for the convenience of swiping our cards. Like most debit and credit cards issued, we have fraud protection. Therefore, we were not liable for the fraudulent charges debited to our account, and the money was refunded the same day we called. This is in addition to the airline miles we earn, the money we save on discounted gas and cash back we receive at the end of the year. Our cards treat us pretty well. Of course, due to online banking, we are diligent about reviewing our account and keeping track of transactions. This made it very easy to spot the fraudulent charges to an online gaming service.

As for the benefits of cash, I’m still waiting.

Yes, there is the budgeting argument. Budgeting gurus will tell you to forego your cards and take out the cash you need for the week, and when it’s gone it’s gone. No overspending! And then there is acceptance; cash is accepted nearly everywhere and this is certainly convenient — but cards are now accepted nearly everywhere.  In fact, with the emergence of Square and other payment technologies, cash and card are nearly on equal acceptance footing.

In our household, having cash is considered a negative because we tend to spend more freely with cash than we do cards. Our mindset is that cash is ‘extra’, money that is already been deducted from our checking account’s running balance that we view obsessively online, and have therefore already spent. So spend away!

I commonly go on business trips without any cash at all. Sure, I may get a look from the cashier when I swipe my card for a pack of gum, water and a newspaper at the airport book store, but those looks have grown few and far between. Why? It’s because I’m not the only one without cash in their wallet. When I’m traveling, the only time that not having cash crosses my mind, is when I get in a cab. But “do you accept credit cards?” is the only hurdle I need to jump to be cashless and on my worry-free way.

Plus it’s harder to keep track of cash, unless you add up and keep your receipts. Using cards not only helps with receipts, budgeting, tax accounting; if there is ever a dispute concerning a payment or the amount paid, I go online. How did we dispute payments before there were cards? It seems impossible.  With cards, I can review my spending!

There is one exception where I almost always use cash: construction. Almost any contractor I use offers a cash discount. Furthermore, as a landlord, I incentivize my tenants to directly deposit their rents into my account, again foregoing cash for convenience.

The latest retail security breach is certainly serious, and having your identity stolen is nothing to make light of. But even with the increased awareness of identity theft, the number of cards per wallet and card usage has steadily increased over time, while the use of cash has decreased.

In my household, cards rule the nest – and it will take more than the consequence of making a phone call and receiving a new card in the mail to change behavior. The momentum that card users enjoy is going to have to slam into something much more disruptive than a security breach in order to reverse the usage tide. Perhaps a mobile payments platform that offers both security and convenience will change the game.

For more information please contact Tim Spenny, Vice President, GfK Financial Services at tim.spenny@gfk.com.

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