Demand for chips has surged
While Americans have been used to getting new credit or debit cards in the mail within a matter of days, wait times are now extending past six weeks, especially for credit union members.
It’s all down to a shortage of semiconductors, which are sometimes called integrated circuits (ICs), microchips, or simply chips. They’re essential components of almost all modern electronics.
Demand for these tiny pieces of tech surged during the COVID-19 pandemic, as purchases of home electronics like gaming consoles, computers, and TVs skyrocketed. Meanwhile, manufacturing was regularly being disrupted by worker illness.
The automotive industry also underestimated the demand for vehicles, and therefore the demand for chips, when the pandemic hit, according to Bloomberg.
Possibly contributing to the issue is the Biden administration’s push for wider adoption of electric vehicles, which use about twice as many chips as standard vehicles.
Down the line, these factors created a shortage of credit and debit cards with chips, which offer greater security and encryption than the plain old magnetic stripe.
Whether you’ll be affected may depend on where you bank. Major institutions like American Express, Chase and Discover don’t seem to be experiencing delays yet, but credit unions and regional banks are seeing significant holdups.
Read more: Here's how much money the average middle-class American household makes — how do you stack up?
Ditch the plastic and digitize your wallet
Instead of pulling out your card for every transaction — possibly risking losing it at the grocery store — you might want to consider tapping with your smartphone instead.
Americans have been slow to adopt digital wallets, but during the COVID-19 pandemic their no-contact nature made them a more appealing option.
Nearly 90% of consumers are now using some form of digital payment in daily life, and 62% use more than one kind, according to a 2022 report from the management consulting firm McKinsey & Company.
What are the pros?
Aside from being touchless and fast to use at checkout, digital wallets are useful for storing loyalty and rewards cards as well.
Proponents argue that they’re actually more secure than your old plastic card. Your data is encrypted, so retailers and merchants never gain access to your credit card information.
And unlike with a physical card, which thieves can easily use to make purchases in stores or online, you can safely secure your phone with a passcode, facial recognition, or fingerprint scan.
You might even be able to continue using your digital wallet for purchases after your card expires. Most issuers will automatically update your card information, so you won’t have to wait for a new card to be delivered.
What are the cons?
Not all brick-and-mortar locations accept digital wallet payments, so you’ll probably need to keep your physical wallet on hand anyway. And you may require an internet connection to process the payment as well. Just make sure to avoid using public Wi-Fi so your financial information stays secure.
Much like tapping with your card, some experts believe switching to a super-fast, super-easy mobile wallet could cause your spending to spiral, which potentially cause you to rack up debt.
A 2018 study from researchers in the U.S. and China found that switching to the mobile-payment platform Alipay increased the frequency of transactions by more than 10% and upped total spending by about 3%.
Despite this finding, Yuqian Xu, an assistant professor of operations management at the University of North Carolina at Chapel Hill and one of the authors of the study, said mobile payments are “the future of how consumers will pay for small-ticket items.”
“You will see fewer and fewer people carrying actual, physical credit cards in the coming years,” Xu said in a press release. “They’ll just carry their phones, so they may not even need their wallet. It’s more convenient and it merges payment channels.”
Fast forward to 2023 and those predictions seem to hold true. Analysts are predicting 50% of all adults globally will be using mobile wallets, according to global payment platform NMI
As more payment platforms emerge and more people swap their leather wallets for the ease of digital ones, how you monitor and control your spending habits will need to adapt to the times as well.
