Kara McGuire: Plastic in the pocket

Some places let you pay for groceries with your thumb. Other cultures regularly use cell phones as currency. I have to borrow from my daughter's piggy bank to ante up for my girl's-night-out poker game. Is cash on its way out?

Visa seems to think so.

A 2006 survey paid for by the company found 60 percent of 18-25 year olds -- an age group labeled "Generation P," for plastic -- rarely carry cash.

But plastic peddlers have a vested interest in bills and coins going the way of the dodo bird because they receive fees for card transactions. Have you seen the Visa commercial about the fast-moving food line that comes to a screeching halt because someone decides to pay with cash instead of a check card? No hidden message there.

So I set off to Rosedale to do my own informal survey. Of the half-dozen young people I spoke to, all but two rarely carried cash. Of the two, one uses cash since her parents took away her card and the other primarily uses a debit card, but she also uses cash tips from her coffee shop job.

All cited convenience and ease as the main reasons why plastic trumps paper.

"I'd think the percentage would be even higher [than 60 percent] with direct deposit and debit cards," said Alex Miller, 19, of Shoreview. He uses a debit card for purchases instead of taking money out at a cash machine because it's easy and it avoids pesky ATM fees.

Susanna Goulert, 21, also uses a debit card. "I know I have a spending limit," the Minneapolis resident said. "With a credit card you can go all out." The Federal Reserve says debit cards are the nation's fastest-growing form of retail payment.

Generally, members of Generation P say they keep tabs on their account balances by checking online or calling the bank for their balances. The survey found 84 percent of consumers ages 18-25 said using a payment card made it easier to track monthly expenses; online banking gives you a neat little tally of just where your hard-earned money went.

But most think it's easier to spend more with plastic than with old-fashioned dollar bills. This factor "probably adds to the average American's debt," Miller said.

The Dell computer kiosk where Miller works doesn't even accept cash, forcing potential customers to trade bills for gift cards at the mall's customer service counter. He figures that's the rule because cash can be stolen. Not only that, but an employee would have to count the cash and take it to the bank. "It saves money in the end not to have money," he said.

The coffee shop where 19-year-old Katie Sterner works used to require a $5 minimum purchase on card transactions. Small merchants can really feel the sting of fees charged by card companies. But a few months ago the shop stopped requiring a minimum, and now patrons routinely charge smaller amounts.

Those cups of coffee and other purchases for less than $2 are dubbed "micropayments." Seven out of 10 consumers in Generation P use payment cards for the smallest of purchases. Goulert buys bottles of pop with her plastic. Miller once charged a pack of gum. Neither would be surprised if one day paper dollars and metal cents go away.

TIPS FOR USING PLASTIC WISELY

Understand your cards. The total you see in your bank account isn't always the amount available to spend. Ask your bank how it records deposits and withdrawals. For credit cards, read the fine print. Seriously.

Consider overdraft protection. It's not always possible to maintain wiggle room in an account, especially when you're starting out. Look into overdraft protection, which typically links to a savings account or credit card to cover any shortfalls. Some banks charge a fee for this service while other banks and credit unions offer it for free.

Be rewarded for using your card. Many credit cards and even some debit cards now offer rewards of some kind, whether points for merchandise, airline miles or cash back.

Have a spending plan. One downfall of convenient and quick plastic? Purchases add up painlessly before you know it. But the pain comes later. Before spending, figure out what you can afford to buy. Put away the plastic when you've reached that limit.

Know your plastic personality. Are you disciplined enough to spend wisely with credit cards and careful enough to avoid overdrawing your checking account using a debit card? If not, go back to cash. The time it takes to withdraw money and count it out at the register is preferable to getting into debt or wasting money on fees.

Kara McGuire • 612-673-7293 or kara@startribune.com.