Are We Becoming a Cashless Society?

In recent years as more digital methods of payment have gained in popularity, there has been discussion and speculation about whether cash as a medium of currency and payment is beginning to die a slow death. For years, the adage cash is king was paramount, but now many digital options are poised to overshadow this traditional currency.

I’ll never forget going to a coffee shop a few months ago and the cashier did not accept my dimes. The store wanted nothing to do with change that was smaller than a quarter. I couldn’t believe it. In my personal finance brain, money is money. But apparently not everyone thinks that way.

While people may think that cash is obsolete and should be phased out of use anyways, plenty of others take up the opposing side, stating that cash is still critically important to a healthy economy and that removing it would be a terrible idea. And pretty much a cashless society would be the demise of the vice economy. While both sides have some good arguments and some bad arguments, the fact is that cash isn’t going anywhere any time soon. Hard currency has been a part of human history for centuries, though the modern variation of paper bills and coins not backed by any gold or silver is a much more recent development. Let’s take a look at some fun money facts.

Common Payment Types and How Often They’re Used

There are a number of different methods that people commonly use to purchase goods. The methods you’re most likely to see include credit cards, debit cards, checks, and cash. But while those four have been the dominant methods for years now, newer methods like digital wallets and contactless payment cards have begun to slowly grow in market share.

According to the Federal Reserve Bank of San Francisco, payment by check is the method that has fallen out of favor the most as debit and credit cards pick up the slack. Cash, on the other hand, is still widely used in a number of different situations, even if cash only accounts for 14 percent of total consumer transactions based on value. Some of those particular situations where cash is king include transactions under ten dollars, where cash is used in 66 percent of transactions. Additionally, cash is used in 40 percent of retail transactions with debit cards used in 25 percent and credit cards at 17 percent. The final 18 percent is split with checks and electronic payments taking seven each, and other payments claiming the remainder.

While cash is still a major player in the realm of going to the store to buy stuff, the growing popularity of eCommerce and shopping online is beginning to have an effect on people’s outlook on cash. This is even more pronounced as more business fields are beginning to refuse accepting cash as a payment. According to The Huffington Post, airlines no longer accept cash for in-flight purchases, which I know is true of American Airlines.

Problems with Cash

While cash is still a major player in the payment method game in some areas, the overall trend is towards alternative purchase methods. There are other problems with cash that aren’t normally discussed that may be starting to have an effect on how consumers react to it. According to TransferWise, a study by Tufts University discovered that the cost of dealing in cash to the US alone sits at close to $200 billion. It literally costs the US government around $637 per person for cash to be available for use. That’s a decent chunk of change. These costs come from a couple of places, including the transportation and collection services required to deal with cash.

Additionally, cash can be very dirty, which makes OCD people like me cringe. According to ABC News, the Wright Patterson Medical Center conducted a small study examining the cleanliness of $1 bills. They found that a massive 87 percent of the bills they looked at had potentially harmful bacteria on them — and who knows what else! Of the 68 single bills they collected from customers in a grocery store checkout line, the researchers only found four they considered relatively clean.

Will Cash Disappear Soon?

Truthfully, that question is difficult to answer. Cash will remain an important part of economies around the world for some time yet, but futurists have been predicting the fall of cash for years now. While cash is still a major player in the payments game, its use has been steadily declining for a number of years.

Cash isn’t gone yet, and it’s not likely to go away completely any time soon, but it’s no longer king of the monetary castle.

What Does This Mean for You and Your Business?

Realistically, these trends shouldn’t really have any effect on your business, unless you choose to not accept a particular payment type. While some businesses no longer accept cash, that doesn’t mean you should stop taking money in return for your stuff as well.

If you start denying cash payments, you will most likely see some detrimental effects to your bottom line. They may not have a huge impact, but they will be there. The best bet for moving forward with your business is to continue accepting cash along with all other payment types while keeping an eye on what’s happening in the payment method world. Plus, having a cash drawer, like what eCommerce vendors like Shopify offer, can come in handy down the line.

You never know when you will need two one dollar bills — like when you really want some coffee and the only thing nearby is a street vendor. I promise you, that two dollars will be a lifesaver!

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Melanie

Melanie Lockert is the founder of the blog and author of the book, Dear Debt. Through her blog, she chronicled her journey out of $81,000 in student loan debt. She is also the co-founder of the Lola Retreat, which helps bold women face their fears, own their dreams and figure out a plan to be in control of their finances. She is passionate about empowering women, helping others get out of debt, and focuses on the intersection of debt and mental health. Every September she organizes a Suicide Prevention Awareness Blog Tour, to help share resources for those struggling with debt and suicide. In addition to her love of personal finance, art and music, she is also a karaoke master and a cat mom to Miles and Thelonious.

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