Would You Buy Stuff at a Garage Sale With a Credit Card?

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Square Inc.

Every summer, phone poles fill up with colorful fliers advertising events like garage sales, flea markets and bake sales. But this year, you’re more likely than ever to pay with plastic for that tchotchke or cupcake. A new study confirms that we’re using cash less often than either debit or credit cards, and devices that let any seller accept a credit card have just hit shelves at more than 20,000 stores. 

According to Javelin Strategy & Research, the amount of cash we spend is dropping. At stores, debit cards now make up 31% of sales volume, followed by credit cards at 29%  — cash makes up 27%, and Javelin says this will drop by four more percentage points in five years.

As cash use declines, the prevalence of devices like Square is on the rise. Square, which was started by Twitter co-founder Jack Dorsey in 2010, has built a fan base of small businesses that don’t want a long-term, expensive contract with a payments processor but still want to offer customers the convenience of being able to pay with plastic. These small dongles plug into a smartphone or tablet and, along with a downloadable app, turn the device into a credit card reader.

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“It will definitely enable people with micro-businesses to easily accept card payments,” says Beth Robertson, director of payments research at Javelin Strategy & Research. “And there are some individuals who will use the devices for P2P type payments.”

In 2010 — the same year Square was founded — just over half of person-to-person spending was conducted with cash, according to research from the Aite Group, and roughly another quarter was conducted with checks. Only 2% went on debit and credit cards combined. This year could be the tipping point to fundamentally shift that balance.

Last summer, Square was available at roughly 200 retailers nationwide; last week, the company announced that number had grown to 20,000. People can buy a Square at big chains like Walgreens, Wal-Mart, Target and Best Buy. (It costs $10, but comes with a mail-in rebate that covers the full price.) With this big push into stores, more people who aren’t small business owners will become familiar with the device. The company says people who set up a Square account for “individual use” are one of its largest categories of users, with more than 100,000 such customers.

(MORE: Want to Stop Spending? Try Thinking About Cash)

Square isn’t the only dongle out there that turns smartphones into card readers. Tax and bookkeeping software company Intuit has a swiper called GoPayment, and eBay’s PayPal division debuted a device called Here earlier this year. All charge a little less than 3% per transaction; all offer a flat rate, although Intuit also has an option to pay a monthly fee and pay less per transaction.

While the experts acknowledge that a 3% cut might deter some people from using a card reader if they’re trying to sell stuff on a slim margin, we predict these devices will be popular with people who are just trying to clear the junk out of their basements and garages and want to avoid the hassle factor and security risk of a pouch full of cash. Eli Lehrer, president of the think tank R Street, says that although cash isn’t going to disappear entirely for a very long time, “The use of cash is going to continue to decline and this is part of it.”

MORE: The End of Cash

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