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In the age of credit, why do Canadians still love cash?
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The Canadian Press
OTTAWA - In the age of debit and credit cards, Canadians still love cash.
That's the conclusion of an unusual survey by the Bank of Canada which talked to about 6,800 Canadians, including half who were asked to record their purchases over a three-day period.
The finding is that cash still accounts for 53.8 per cent of all transactions, and if the purchase was under $25, that share goes to about 70 per cent.
"Cash has several characteristics that make it more appealing to consumers than other payment methods," research economists Carlos Arango, Dylan Hogg and Alyssa Lee write in the discussion paper Why is Cash (Still) so Entrenched?
"In particular, consumers prefer to use cash because they find it fast, cheap, safe against fraud and convenient for budget-control purposes."
The survey, which was conducted in November 2009, asked consumers a range of questions on transactions and preferences. As well, about 3,500 people were asked to keep diaries detailing three days of shopping.
Ease of usage appears to be a key consideration for consumers, the responses suggest. Canadians are more likely to use cash if they have plenty of it in their pocket, less so if spending it would necessitate taking a trip to the ATM. As well, some used cash because they perceived merchants would not accept plastic.
But cash is far from the king it once was.
The Bank of Canada research suggests that its rule may have a limited time span as plastic options become more accepted and easier to use.
In terms of overall value, credit and debit purchases already account for more than 70 per cent of the total, meaning that Canadians predominantly prefer plastic for big ticket items.
"Debit cards and credit cares ... dominate in higher-value transactions where they are generally accepted by merchants, speed is not as relevant, credit card rewards are more generous, delaying a payment is more attractive and people prefer to hold on to their cash balances," the researchers say.
The survey also shows cash is used less often by younger Canadians, and the affluent.
And the report notes that hard cash is losing its appeal even on small-ticket items as debit and credit options become more user friendly with such innovations as "contactless" cards.
"Although contactless card features were just introduced in Canada a few years ago, there is already evidence of their effect on cash usage," the report states. "More recent innovations allow debit and credit payments through mobile phones, as well as make credit card payments quicker for low-value transactions by eliminating the requirement to provide a signature."
Perhaps a clue to the future is in a graph provided by the Bank of Canada. Of the three main options, it shows a steady decline in the usage of cash as a share of payment value to about 30 per cent in 2009 from about 53 per cent in 1992.
There is no corresponding data available on cash's usage in the number of transactions, but the research suggests that too has been falling.
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