Most Americans still prefer paying with cash for items costing less than $5, but that trend is changing, according to a recent report by CreditCards.com.

(Medioimages/Photodisc, ThinkStock)
(Medioimages/Photodisc, ThinkStock)
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The report finds that while two in three credit cardholders typically use cash for small items, there is a clear generational divide in the way people pay for things.

Overall, 65 percent of Americans usually pay for purchases under $5 with cash, 22 percent use debit cards and 11 percent use credit cards. The tendency to use cash increases sharply with age. According to the report, nearly eight in 10 people age 50 and older prefer to use cash while those between the ages of 18 and 49 use both cash and credit or debit cards.  But, the youngest cardholders, those between the ages of 18 and 29, prefer plastic.

"When it comes to the millennials, I think that might be a function of just growing up and coming into their own in pretty tough economic times where they're struggling to find a job and they want to make sure they're not spending more than they actually have," said Matt Schulz, senior industry analyst at CreditCards.com. "Cash has not been a part of their day-to-day lives for very long. This is a generation that might have used a debit card to pay for their lunch at school, which is something someone in their forties never did."

Meanwhile, the older generation has always used cash.

"It's just a function of doing things the way they've always done them," Schulz said.

Cash is also the preferred payment method for nearly eight in 10 rural residents compared to 62 percent of city dwellers and suburbanites.

"That could be because smaller towns have more moms and pops type places where you know each other better and feel more confident paying with cash whereas cities are a little faster paced and you may just want to have the credit and not worry about going to an ATM machine when you're heading out," Schulz said.

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