WHAT’S IN YOUR WALLET?

WHAT’S IN YOUR WALLET?

| February 21, 2019

You’re at the checkout. How do you pay for your purchase? Do you reach for a credit card, debit card, cash, check, or some form of electronic payment, such as a mobile wallet or wearable?

The Federal Reserve Bank of San Francisco’s 2018 Findings from the Diary of Consumer Payment Choice (DCPC) found participants preferred to pay
using debit cards. The order of payment preference was like this:

Payment Type      Preference
Debit cards            42 percent
Credit cards           29 percent
Cash                      24 percent
Check                      2 percent
Other methods        2 percent
PrePaid                   1 percent

Here’s an interesting side note. The more money a household earned, the more likely they were to pay by credit card.

HH Earnings                  Credit            Debit             Cash     
$25,000 - 49,999       13 percent     29 percent     36 percent
$50,000 - 74,999       19 percent     31 percent     27 percent
$75,000 - 99,999       21 percent     29 percent     31 percent
$100,000 - 124,999   30 percent     23 percent     24 percent
$125,000 or more      33 percent     21 percent     24 percent

The shift in preference begs the question: Do wealthier people have more debt? Some do, but wealthier households are more likely to pay off credit card debt each month, according to author Tom Corley who was cited by Credit.com writer Gerri Detweiler.

If you use credit cards frequently and haven’t been paying down your balance each month, it may be a good idea to do a simple calculation to determine how much you are paying in interest each year. Just multiply the interest rate you pay by the amount of debt you carry. The amount may surprise you. Nerdwallet’s American Household Credit Card Debt Study reported, “Households with revolving credit card debt will pay an average of $1,141 in interest this year.”

If retirement is 10 years in the future, saving $1,141 a year, and earning 6 percent annually on the money, could provide about $16,000 in additional savings. If retirement is 30 years away, you could increase your savings by about $96,000. It’s food for thought.

*This is a hypothetical example and is not representative of any specific investment. Your results may vary.

If you have investment questions, contact us.  231-720-0619

photo by: Wallet ID 63649027 © Pioneer111 | Dreamstime.com