Thursday, August 28, 2014

Remember Store Credit Cards and Cash?

Credit cards remain a highly popular payment method in America. Thirty years ago, nearly every major retailer in America had its own proprietary charge card, usually self-funded but sometimes backed by a third party such as General Electric or Citicorp. Many consumers had wallets filled with cards from Sears and other mainstream retailers, happy to be billed once a month for purchases made all month--and happy to get catalogs and special offers only for cardholders.
About that time, MasterCard (originally Master Charge) and Visa began charging into the department store industry, seeking to be accepted at the point of sale. Looking at an old issue of Mart magazine, as of mid-1977, 32 out of the top 100 U.S. department stores honored MasterCard and Visa, compared with only nine of the top 100 department stores honoring the bank cards in 1974.

Fast-forward to the 21st century. Very few department and specialty stores operate their own credit programs these days. Most have sold their receivables to a third party, and accept all kinds of plastic at the point of sale. For example, Synchrony (formerly part of General Electric) provides private-label credit services to Walmart, JC Penney, and other retailers. Citi Retail Services provides private-label credit services to Staples, Office Max, Best Buy, and other stores.

Cash is still around, but some consumers prefer plastic or mobile payments. According to a new survey, Millennials are more inclined toward digital payments for small purchases, while Boomers will use old-fashioned cash for payments under $5. Gadgets like Square and Amazon's new Local Register make it easy for small businesses to quickly authorize card payments via mobile, so why carry cash?

Consumers know about digital wallets (Google Wallet, PayPal, Apple Passbook) but actual usage is still relatively low, according to research. Apps are helping to fuel mobile payments. Will your wallet have any credit cards by 2020? Will you even be carrying a wallet with dollar bills and coins?

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