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Q & A

Cash isn't going away. Here's why.

The Current State of Cash

According to the Federal Reserve, there is over $2.4 trillion in cash in circulation in the U.S. today. Cash accounts for over 80% of all transactions worldwide. The need for legal tender remains high in a variety of settings, including small retail shops, convenience stores, and environments where tipping is common. Cash has proven resilient despite threats over the years from a variety of alternatives, including credit and debit cards, online payment systems, and digital wallets.

Maintaining a cash option has already generated widespread public support across the country.  Within the past two years, the state of New Jersey, and cities including Washington, D.C. Philadelphia, San Francisco, and  New York City all have enacted laws protecting a consumer's right to use cash.

Paying with cash:

  • is something everyone can do regardless of income or status.

  • is essential for consumers who don't have bank accounts or credit cards.

  • provides more privacy than other forms of payment.

  • limits the risk of data breaches.

  • helps consumers budget and teach children financial responsibility.

Is Cash Going Away in the U.S.?

No, cash is not going away in America, no more than paper has ever disappeared from the long-predicted “paperless” office.  While cash is not “going away,” there’s no question that growing numbers of businesses and individuals, in the U.S. and other developed economies, are seeing growth in digital payment methods and some reduction in cash usage levels.  However, more U.S. currency is in circulation now than at any other time in our nation’s history, and many millions of Americans rely solely upon cash as the only way they make their daily purchases. 

While cash usage remains strong, there are those special interest groups, including the global charge-card companies, that advocate and promote the use of alternative, noncash forms of payment, because the profits of their businesses stand to grow dramatically as the number and dollar amount of cashless transactions increases.  It is estimated that the card companies now reap a trillion dollars in transaction profits, which would double if they should succeed in converting current cash transactions into electronic funds-transfer (EFT) card transactions, underscoring why they are determined to see cash go away. 

Consumers, however, obviously value the utility of cash as a payment option, as shown by the volume now in circulation and by the way in which the pandemic and other emergencies invariably generate larger cash withdrawals by the U.S. populace, seeking a vital safety net in times of crisis. 

Who is trying to eliminate cash?

Opponents of cash include:
 

  • Global credit card networks and big-bank issuers of credit and debit cards are the major opponents of cash.  There is also opposition to cash from certain manufacturers and developers of hardware and software used in credit and debit card services, cryptocurrency providers, and other such “cashless” transaction providers, along with the owners and operators of their supporting data processors and the financial telecommunications networks needed for all such transactions.

 

  • Some large regional, national, and international retailers that seek perceived labor-cost savings and increased profits by eliminating cash in their operations.

 

  • Data-mining enterprises, which acquire and then resell data embedded in digital financial transaction records.  Their business consists of compiling, organizing, and reselling to marketers, retailers, financial intermediaries, etc., detailed information about consumers’ purchasing habits and preferences.  

 

Because every noncash sale creates a digital record of the time, place, amount, manner of payment, and subject of the sale, and often the identities of the purchaser and the seller, every such sale also creates additional stock in trade for data-miners and thus contributes to the continued rapid growth of their industry.

In addition to creating a wealth of new digital records for data-miners to collect and resell, eliminating cash would result in considerable benefits for other advocates of cashless commerce:

  • Card issuers, networks, and processors all receive transaction fees—which may be levied directly upon consumers, merchants, or both, and ultimately show up either way in higher prices paid by consumers for goods and services—associated with every non-cash transaction that traverses their facilities.   

 

  • Manufacturers and developers supplying the hardware and software used in noncash transactions receive proceeds on the sale, servicing, and maintenance of their products, as well as additional sales of periodic—and often mandatory—upgrades and enhancements for those products.  The more cash transactions they displace, the more business and revenue they generate for themselves.

 

  • The value to these companies of drastically accelerating the transition to a cashless economy is illustrated by the financial and other incentives that many of them offer to consumers through rewards programs, and to retailers—including discounts or rebates on purchase prices and fees—not just for giving their customers the option to make noncash payments, but sometimes for agreeing to stop accepting any cash payments at all and instead to make all their sales on a non-cash basis.  

 

In 2018, for example, Visa awarded grants of $10,000 each to 50 restaurants and other small businesses in the food-service industry that had accepted its “Visa Cashless Challenge” and agreed to eliminate cash from their operations.

What types of businesses and demographics use cash today?

  • Cash is most frequently used in lower-value transactions.  According to Congressional testimony last year, a 2019 study by the Federal Reserve found that cash remains the most common form of payment for transactions under $25, while only six percent (6%) of transactions exceeding $100 were in cash.  The study found that 42 percent of payments under $25 were made in cash, increasing to 49 percent in transactions under $10.

 

  • Sales for cash most often involve goods and services considered staples or necessities, such as meals and groceries, children’s clothing and school supplies, and personal-care products and services, such as cosmetics goods and barber shops and beauty parlors.  Surveys show that African Americans are more likely to rely on cash than Hispanics or Caucasians, and that cash is used more frequently by low-income households, people under 25 or over 65, and those living in rural areas.

What are the costs of accepting cash?

Although they offer no independent studies to support their assertions, no-cash advocates say eliminating cash would improve businesses’ overall bottom lines by reducing the costs of employee time spent in handling, transporting, and counting cash and in daily reconciling of cash balances, and that risks of employee theft and of losses from burglaries or robberies would be reduced, along with reducing businesses’ security costs and potentially their insurance costs.  These advocates conveniently overlook the significant costs associated with electronic transaction/card fraud, excessive network and processing fees, increased audit requirements, and hacking fraud, as well as a host of other costs in an environment of purely digital payments.

What are the costs of not accepting cash?

The business and societal costs of not accepting cash are many and significant.  Refusing to accept cash discriminates against the millions of unbanked and underbanked Americans who at any given time are able to pay for goods and services only with cash.  Eliminating cash would remove a vital lifeline for these individuals and families.  At the same time, removing the option to pay with cash would impose upon consumers card fees or other EFT fees in every single transaction, while also dramatically restricting payment choice for those consumers.

Eliminating cash also would mean a significant loss of consumers’ privacy, and increased exposure of consumers to both card fraud and identity theft.  In addition, businesses that refuse cash would face the loss of customers who have no other way to pay.  Moreover, without the option to pay with cash, both businesses and consumers would lose the valuable safety net that allows them to continue to do business when digital transactions become impossible because the power is out, or service is unavailable as a result of unavoidable natural disasters, network outages, or other systems failures. 

A cashless world also would deprive families of an important tool in budgeting family and personal spending and teaching financial responsibility to our children.  For the nation, the loss of universal acceptance of U.S. currency at home would threaten a loss in the global perception of the strength and power of the world’s reserve currency - the U.S. Dollar.  Cash remains a vital payment option, safety net, and store of value that must be maintained, nurtured, and preserved as such for the foreseeable future as a matter of sound public policy.

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