You might ask your students to rank order the following non-cash payment types from most common to least common and see how they do:

• Credit cards
• Checks
• Prepaid debit cards (often called prepaid cards)
• Debit cards (what comes with your checking account)
• ACH (automated clearinghouse payments – see definition below)

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The Federal Reserve is out with their triennial report on non-cash payment trends and there are some fascinating charts within it (look for more over the coming week). Today, we focus on the big picture…what are the trends in how people are paying for stuff in a non-cash way? 

Here are the trends over the past 15 years showing number of payments by noncash payment type:

For those wondering what an ACH payment is, here’s how they define it in the report:

The ACH system can be used for a variety of funds transfers, most of which are payments between consumers and businesses. The ACH includes both credit transfers and debit transfers. ACH credit transfers are payments for which the payer’s depository institution “pushes” funds to the payee’s depository institution, such as direct-deposit payroll payments. ACH debit transfers are payments for which the payee’s depository institution “pulls” funds from the payer’s depository institution, such as an insurance or mortgage payment drawn from an individual’s account on a prearranged basis.

Questions for students:

• How well did you predict the top three noncash payment types?
• How many of these payment types do you have experience with? Do you use one more than the other? Why?
• Which payment type has had the largest increase since 2000? the largest decrease? Why do you think consumers have shifted their preferences in this way?
• What advantages do you see in using a debit card vs. a credit card? What is one disadvantage of a debit vs. credit card?
• In 2008-09, the US had a severe recession. At that time, consumers completed about 20 billion more debit card transactions compared to credit cards. What is the difference (in billions of transactions) between these two payment types in 2015 and what might explain why one has grown faster than the other?

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In this NGPF Project: Payment Decisions, students make choices about how to pay for certain items while explaining their rationale.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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