The End of Cash?

By glblguy

Cash

19% – Segment of the 2006 US Economy involving cash

Visa U.S.A Inc. recently conducted their annual consumer spending survey. Overall, respondents said that they prefer electronic transactions to traditional paper money and checks.

Visa’s chief economist Wayne Best said that 79% of baby boomers and 74% off echo boomers (the children of baby boomers) believe that the U.S. economy will be cash free as early as the next decade.

According to Best, during the past 10 years, check usage has declined from more than 1/2 of all monetary transactions to less than 1/4 today. Boomers will account for 46% of the 15 trillion U.S. economy in 2015. This is a huge percentage of consumers wanting to make the shift from cash to electronic.

Visa is recommending that retail operations aggressively review all cash-processing operations and shift to electronic exchanges. Best says that in 1996, 2% of adults used debit cards. Today, 75% of adults do. This is a radical shift and further backs up the Visa’s claims.

With that being said, I think we have to take these numbers and claims in context: All of the numbers are from Visa. Visa doesn’t make money on cash and it would of course be in their best interest to move all financial transactions from cash to electronic. Are their claims overstated, yes most likely; however, I do believe that people are moving to electronic transactions.

I know I am, it’s just easier. I use my debit card for most all purchases as I seldom carry cash with me. A debit card takes up less space, is easier to use and allows me to automatically track my expenditures using online banking. From a different perspective, it also has major environmental benefits causing a significant reduction in paper.

What do you think? Is cash on the way out? How would you feel without cash in the U.S Economy? Comment below with your thoughts or just contact me.


14 Responses (including trackbacks) to “The End of Cash?”

  1. justin Says:

    I’ve always found cash to be cumbersome and easier to spend than using plastic of some sort. Coming from a country, Australia, that had EFTPOS (basically PIN based debit cards) become popular in the late 80s, it only seems natural to remove cash from daily transactions. There’s the inconvenience factor for people who don’t accept plastic (road side stands, small stores, ticket scalpers etc.) so I don’t think society can really be cashless, but removing cash from transactions at drive throughs reduces issues such as the guy or more likely the girl in front of you counting out exact change. It also reduces chances of dropping the change when being handed back to you, etc. etc.

    Visa does have a vested interest in moving away from cash, but cash handling isn’t free, it just costs in different ways. Reconciling registers, running to the bank for deposits, counting coins and notes.

    Personally, I find it easier to spend and forget with cash than I do with a card, so I wouldn’t mind more places taking plastic.

  2. glblguy Says:

    Hi Justin, I agree. Also, didn’t intend to imply handling cash is free. Given I work for a bank, I know all the gory details of cash and checks and their associated costs. Just tried to show that by people using cash, Visa gains nothing.

    Thanks for your always great perspective!

  3. PaulaB52 Says:

    You know, this article says how the boomers are moving towards all plastic. I don’t know where they took their data from, but it seems like every time I go to Walmart or Hobby Lobby, there is some little old lady in front of me writing a check!

    Maybe in more urban/hip areas, the boomers are using plastic, but out here in rural LA, checks & cash seem to still be king.

  4. glblguy Says:

    Hi Paula, seems like I run into the same thing. I have noticed a significant decline though in cash in checks in general. Maybe they just like to get in front of us :-)

  5. justin Says:

    I do kind of agree with some of the Visa commercials though, standing behind grandma as she counts pennies or remembers she actually has to pay and searches for her checkbook, then asks who she makes it out to can be time consuming.

  6. Köksbodskapitalisten Says:

    There is also the question of fraud and trust. As a customer I want to see the card reader.

    At a restaurant I won´t pick up my card until I have established that I am at a place where they come out with the card reader to the table. Here in Scandinavia that is still not the norm so I keep a few hundred crowns (official currency in non-Euro Scandinavian countries) in my pocket to be able to pay cash when I´m eating out.

    Similarly, at a non-reputable store I always use cash or a specific debit card with just a small amount on the connected account, to minimize any loss if my card number should get wings.

  7. glblguy Says:

    Köksbodskapitalisten, I think you concerns are dead-on. Just seems that the trend would show most people aren’t concerned about it. Thanks for adding your thoughts on fraud and trust, I think they are important issues to consider.

  8. justin Says:

    @Köksbodskapitalisten: We don’t really have these problems in the US, as credit cards give us an extra layer of protection from fraud. A fraudulent charge appears, you call the card company and tell them it’s fraud, never have to worry about it again.

  9. bmhumphries Says:

    That is interesting. Our family just moved from using our American Express for EVERYTHING in order to build up that cash back bonus to the old fashioned cash envelope system. We never carried a balance so I thought it was a huge win. However, the thought came to me of something I think Ron Blue had written. I know I don’t have the number correct so I won’t try, but he had quoted some research that people who use credit cards tend to overspend by a lot.

    As I thought about that, I realized that it was probably very true of us. Although I would get back ~$400 every year, I am willing to bet I over spent far more than that.

    So with two kidos in college for which we paying all with cash. By the way our oldest boy graduated last year from four years at a private college without any debt! Just 7 total semesters to go – say a prayer for us!), we need to keep a tight reign on the spending. Cash is a perfect way to keep on the straight and narrow.

    It is interesting, having lived in both worlds (plastic and cash) I have gone back to cash. When we were first married, we had to live that way as we didn’t have any money! Then as my income grew, and we had paid off our house, I became rather lax, mainly because I could.

    I find living from the envelopes very satisfying and rewarding. I am sure you can come up with the numbers on paper on why it is better to use plastic that gives rewards, but it sure is nice not to see that bill every month (even if I could afford it). So I hope they don’t do away with cash too soon!

    I love this blog!

  10. glblguy Says:

    Hi bmhumphries and thanks so much for visiting! I’ve read the same studies/articles on credit cards and overspending. I’m a big fan of cash. I agree if you do the math, using a credit card mathematically works out better, but when you use cash you spent money you know you have. Congratulations on paying for private school with all cash! That is a great accomplishment! My kids are still young yet, but not too far off. I hope and pray I can say the same thing! I’m honored you love my blog and hope you continue to visit and comment. Keep us posted on the 7 years! Thanks again!

  11. bmhumphries Says:

    Hi glblguy (what does that stand for?)

    I actually have a total of 7 sememsters left to pay for. My middle boy has three to go, and my daughter has 4.

    Being able to pay for college has been an unanticipated benefit of paying the house off. My wife and I made it a goal to pay that thing off and scrimped and saved to do it. I wanted the mortgage gone so that no matter what happened to my job, I could work at Walmart and survive. If I didn’t have a house payment (or housing to pay for) we could get by on much less cash flow.

    Little did I know how handy it would be not to have a house payment each month when the kids went to college. I do not think we would be able to do it if I still had a house payment to make.

  12. glblguy Says:

    glblguy = Gather Little by Little guy. Couldn’t come up with anything more creative :-))

    Love your comment about “work at Walmart and survive”. You’re a great testimony for being debt fee (or at least mortgage free).

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