Digital Payments for Shopping Are on the Rise, Should You Ditch Your Credit Card?

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I’ve still got a credit card tucked away somewhere safe. 

Credit cards are so last year. It’s all about smartphone tap-and-pay technology. Or if you’re a frequent Amazon shopper, one-click checkout. Then there’s the Gen-Z favorite: buy now, pay later services like Klarna.

All of that equals a cash register’s worth of ways to pay without swiping a credit card.

Everyone is doing it. In fact, digital wallets are now the most popular payment method in the world. They’re more popular than credit cards — but the U.S. lags behind most other countries in adopting them for day-to-day payments.

You may be tempted to ditch your credit card. But before you do, consider the pros and cons of tossing away that slick plastic rectangle and going digital.

Pro: Digital payments are convenient

Let’s face it: It’s easier to click a button or tap a smartphone than carry a credit card. Credit cards have loads of problems. Like faulty chips. Or weird swipe issues that pop up every time you buy bananas at Ralphs. With digital payments, you get to skip all of that.

Some services, like PayPal, save your information for you. It keeps you from filling out lengthy forms asking for your credit card information, home address, and billing address…again.

Speaking of tedious tasks, Cash App allows users to file their tax returns from their account — for free. Digital payments frequently come with bonuses that make them more convenient to use than credit cards alone.

People prefer to avoid getting stuck at the Walgreens register. Especially when the manager starts muttering about technology while tinkering with the broken card reader. Consider updating to a contactless credit card for maximum convenience at the counter.

Pro: Digital payments are secure

Is a digital payment more secure than a credit card? Depends on what you use. Digital payment platforms frequently offer two-factor authentication (2FA), which sends you an email or text message every time you make a purchase.

Mobile wallets like Apple Pay and Samsung Pay are typically safe to use. They use features like encryption and personal IDs to make sure only you have access to your cards. Some of these features must be enabled manually, so users should ensure they take a moment to do so.

Third-party payment platforms like PayPal come with many of the same security features you’d expect from a credit card company. Your digital credit card is not connected to your bank account, and you will still receive notices if your credit company flags fraudulent transactions.

Finally, it’s more challenging for a thief to steal your phone and hack your password than to nick your wallet while waiting in line for the latest iPhone. That counts for quite a bit.

Pro: Digital payments offer rewards

If your credit card offers 1% cash back for shopping at a grocery store, you will get that same benefit with a digital credit card saved to your PayPal account. Plus, some digital wallets, like Cash App, offer their own discounts.

Con: Credit card users spend less

It’s worth noting that credit card users tend to spend a little less than mobile wallet users. That could be because it’s easier to feel like you’re losing money when you’ve got a hard piece of plastic gripped between your knuckles at Walmart.

Con: Credit cards are accepted more universally

I have been guilty of walking into a store with only my phone and walking out empty-handed, having been informed that, no, sir, your local CVS doesn’t take Apple Pay. However, I’ve only been denied a credit card swipe when traveling abroad.

Should you cut up your credit cards?

Despite greater use of digital payments, credit cards are still the best option for many people, and if you link them to a payment app, you can also benefit from an extra layer of security and convenience. Consider keeping your physical cards in a safe place at home and popping them out when you need them. It’s important to note that In the United States, stores accept physical cards more often than digital payments at the cashier, so plan accordingly. Check out the best payment apps for convenient shopping options you may be able to use at your favorite grocery store.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Apple, PayPal, and Walmart. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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