Nearly all (97.5%) of U.S. households have at least one transaction account, such as a checking or savings account, a prepaid card, a PayPal account or a Cash App account, according to a new report from the Federal Reserve Bank of Kansas City. 

The report revealed that 95.5% of U.S. households have some sort of bank account while 71.5% have credit card accounts and 46.4% of them have some sort of online, nonbank payment account, the report published this month said. 

Lower-income consumers use paper-based payment instruments like cash, checks or money orders more than higher-income consumers while high-income consumers rely more heavily on digital payment tools, including debit and credit cards or ACH, than do their low-income counterparts, per the report. 

The Kansas City Fed aimed to understand how some U.S. households may be underserved when it comes to digital payment services, based on “access, use, safety, and affordability,” the report said.  

The report defines transaction accounts as “as deposit or cash balance accounts that can be used to make and receive digital payments with transaction counterparties and to store funds.” 

“Transaction accounts, however, vary in terms of safety, affordability, and functionality,” the report said, affecting the degree to which households use digital payments, the report said. “Consequently, some households rarely use digital payments, while other households use them for most of their transactions.” 

The report touched on consumers’ perceptions of the cost of various payment instruments. It pointed to money orders as being considered by consumers to be the most expensive payment tool, followed by credit cards, prepaid cards and checks, with electronic ACH and debit card payments being seen as less expensive, based on a Federal Reserve Bank of Atlanta consumer survey last year. Cash was viewed as the least expensive payment option. 

The Kansas City Fed’s research offered additional insight into which payment methods are used in various contexts. High-income and low-income consumers used digital payments mostly for remote purchases, presumably including those made online, and turned to them less often for in-person purchases. 

Though inflation has begun to cool, consumers have relied on their credit cards and other loans to stretch their tight budgets, other research suggests. A Federal Reserve Bank of Boston report said 40% of U.S. adults in October of last year had used credit cards or loans to make ends meet, a 37% increase over the prior year. 

As consumers across the income spectrum lean on their credit cards to cover expenses, balances among U.S. consumers continue to climb. Overall, U.S. credit card debt balances climbed by $27 billion, or 2.4%, in the second quarter to $1.14 trillion, according to the Federal Reserve Bank of New York’s Center for Economic Data. 

Meanwhile, more research from the Federal Reserve Bank of Philadelphia found that credit card delinquencies are rising even as financial institutions increase credit lines for cardholders.