4 Reasons Credit Cards Won’t Become Extinct

No doubt you’ve read the numerous articles over the past several months about the pending demise of credit cards. Not the concept of paying with credit, but the little slivers of plastic in your wallet. I think this proclamation is a little hasty.

Yes, I do think that smartphones will be an alternative to whipping out your credit card. AT&T, T-Mobile and Verizon Wireless have formed Isis, which is a mobile payments network that will let subscribers pay with smartphones. It’s launching sometime this year. And Google has teamed up with Citigroup and MasterCard to embed technology in Android phones so they can be used as mobile payment devices.

This is all about a technology called NFC, Near-Field Communication. This technology can turn your smartphone into your wallet. When you’re ready to pay for some merchandise, you wave the phone near an electronic reader. So you use your phone rather than your credit card to make the payment transaction.

The idea of using a smartphone as a credit card is enticing, and I believe this payment option will come to fruition. But I predict we’ll still be carrying around our plastic credit cards.

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Here are four very practical reasons why:

• #1: What if you lose your phone? Or what if you leave the house without it? Most people never forget their wallet. This is where your driver’s license lives along with anything else you deem important enough to carry around (like your credit cards). It’s easy to imagine a scenario in which you charge your phone overnight and then, after having forgotten to set your alarm, you get up and hurry out the door. When you get to the office, you realize your smartphone is still plugged into the wall at home.
• #2: Speaking of charging your phone, how often do you find yourself out shopping and realize your battery power is down to about 3 percent? Your little plastic friends are your backup during an energy crisis.
• #3: It will be very expensive for stores to buy the readers. This will take time and there will be some stores that can’t afford the investment in the near future. You need to have your cards with you in case you're buying merchandise in a store that isn't equpped for mobile payments yet.
• #4: Not everyone owns or can afford a smart phone, especially one with a chip. According to comScore, only about one in four people have smartphones. Just assuming that credit cards will disappear because we’ll all be waving smartphones fails to recognize that many consumers can’t afford to participate.

So even if most stores become equipped with new electronic readers, we’ll still have a bunch of consumers whipping out their plastic and paying the old-fashioned way. To avoid discriminating against those without smartphones (or those who've simply forgotten to bring them along), stores will need to maintain the ability to swipe plastic.

Image by AndresRueda: CreditCards, via Flickr