Economic Perspective: Is There A Future For Credit Cards?

MARY WALDEN:

“Today’s program asks if there is a future for credit cards. Mike, for several decades credit cards encroached on cash as a form of payment. Now many experts say the same is happening to credit cards with new forms of payment, such as mobile apps, pushing credit cards aside. Does this mean that both cash and credit cards will be fighting for survival as payment methods?”

MIKE WALDEN:

“Well right now if you look at the data, the use of credit cards has held steady. It’s lost a little bit, but it’s pretty much held steady. We do see that use of, for example, mobile apps or some kind of a program of accessing your accounts at a bank, or again you use your phone, those are certainly rising.”

“So I think that’s why this question has been generated. Now, if you think about, for example, using your phone as a payment device versus a credit card, one of the problems of using your phone is that what if you’re trying to buy something and for some reason you let your battery run down. So you can’t do that.”

“So there are many futurists that say, “Yeah, credit cards may not have the use that they traditionally had in the future, but we’re always going to have them and have them available because our devices, again, have their own liability.”

“So probably the safest prediction regarding credit cards is just my prediction for cash. Cash has not gone away. Most people carry some cash with them, and probably in the future we are going to continue to carry credit cards, but I do think, and I think most of the futurists think, alternative ways of paying will probably rise and increase in usage. Always though, keep in mind they do have some liabilities in terms of being able to use them if your battery has run down, and of course always the concern about cyber attacks on your mobile apps, et cetera.”

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.