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Good Reasons to Change How You Pay

Freebies, security and convenience are just some of the benefits of favoring credit cards and digital payments over cash and checks

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KATHLEEN FU

Covid has reduced older Americans’ comfort with handling cash, but we still can’t quite let go of the habit. In 2019, adults in two age groups — those 18 to 24 and 55 to 64 — used cash for about one-third of their purchases, according to Federal Reserve research.

Two years later, that older cohort was still using cash 26 percent of the time; for young adults, however, the figure had dropped to only 17 percent. And while 59 percent of young adults said they would be comfortable leaving their cash at home and instead paying with their smartphone, only 36 percent of Americans ages 51 to 65 would sign on to that, according to the payments firm Marqeta. The most common reason older adults gave for carrying cash: force of habit.

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If you’re one of those people who find it hard to kick that cash habit, consider these benefits of going from paper to plastic or electronic when making purchases or dining out.

Rewards

Many credit cards come with rewards programs that earn you points or as much as 5 percent cash back on all your purchases — whether you use the card in person, online or through a smartphone app known as a digital wallet (Apple Pay and Google Wallet, for example). Points can be redeemed for things like flights, hotel stays and statement credits. “Rewards are basically free money,” says Ted Rossman, a senior credit card analyst for Bankrate.com. There is, however, an important caveat: These rewards won’t nearly cover the interest costs if you’re carrying a credit card balance from month to month. “Don’t spend more than you have in your checking account,” Rossman says. “Pay the balance in full each month and avoid interest.”

Security

Worried that electronic payments are riskier than the alternatives? Actually, it’s quite the opposite. All the popular e-payment tools come with multiple features that combat fraud and diminish the risk of making mistakes. For instance, credit cards and digital wallets use encrypted data, “which essentially means your credit card number and information aren’t transmitted,” says Tara Alderete, a certified financial educator with Money Management International. This makes it difficult for anyone to steal your card number. 

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And if a thief does somehow gain access to your card, the transaction may be stopped by your card issuer’s fraud-­detection system. If all else fails, you’re typically not on the hook for unauthorized purchases — as long as you promptly report them to your card issuer. (Note that credit card protections are greater than those for debit cards, and it’s essential to never share your debit card PIN with anyone.) As for dropping a check in the mail to pay your utility bill: There’s been a rise in mailbox theft in recent years, which may make paying bills by credit card or electronic transfer a safer choice. Interestingly, a pre-pandemic study from the Federal Reserve found that 25 percent of adults 65 and older preferred paying bills with checks, compared to only 7 percent of adults ages 18 to 44. 

Credit

Older people tend to have the highest credit scores. But if you paid off all your loans long ago and seldom use a credit card, you could eventually become what’s known as unscorable. Not having an up-to-date credit score could make it harder to qualify for a loan, get insurance, set up a utility account or get a cellphone plan, says John Ulzheimer, a credit expert who formerly worked with FICO and Equifax. “It’s important that you use credit from time to time so your credit reports never start collecting dust,” he says. If you’re worried about paying interest or going into debt, Ulzheimer says, use credit cards only for small everyday purchases and pay off the balance in full each month.

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KATHLEEN FU

4 Simple Rules to Keep Digital Payments Safe

  1. Create a different password for each account. That way, if your credentials are stolen in a data breach, a hacker won’t be able to use the information to access your other accounts. Strong passwords have eight or more characters, are hard to guess and contain a mix of letters, numbers and symbols.
  2. Sign up for security features. Spending alerts can flag unauthorized credit card usage. Requiring passwords (or a scan of your face or fingerprint) can protect your phone and mobile wallet. Peer-to-peer money transfer apps offer two-factor authentication to make it harder for someone to use your account.
  3. Regularly monitor your accounts. At least once each month, review the transactions in your checking and credit card accounts, as well as any accounts in money-transfer services such as PayPal. This can flag potential signs of identity theft; if a transaction looks suspicious, act quickly and report the fraud.
  4. Send money only to people you know. With P2P apps like Venmo, Zelle and Cash App, you can send money to the wrong person or a scammer. Don’t use the apps to pay a stranger or an unfamiliar business. (The dog breeder you found online? No! The baker at the farmers market? That’s fine.)

Convenience

Once you get used to digital payment tools, they’re easy and fast to use. At the register, electronic transactions take just seconds, and you won’t have to fumble through your pockets for loose change. Among friends and family, peer-to-peer (P2P) payment apps make it simple for you to send and receive money from your smartphone or other device. With P2P apps like Venmo, Zelle and Cash App, you can quickly and easily split a dinner bill, repay a friend for a concert ticket, tip a service worker or send money to a relative.

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