America is loosening its centuries-old love affair with cash.
Whether you’re heading to a restaurant or casino with a handful of cash, or just jingling a few coins in your pocket at the hardware store, the old ways of consumer payments are giving way to new ones – and at an accelerating pace.
Consider a recent Pew Research Center poll showing that 41% of Americans say none of their purchases in a typical week are paid for in cash. That’s an increase from 29% in 2018 and 24% in 2015.
“Conversely, the proportion of Americans who say they use cash to pay for all or most of their purchases in a typical week has declined steadily, from 24% in 2015 to 18% in 2018 to 14% today,” it said in the report. “Even so, about six in 10 Americans (59%) say that in a typical week they use cash to pay for at least some of their purchases.”
Is cash on the way out?
Most Americans still like to have cash on hand when they walk out the door.
The Pew poll found that about 58% of Americans like to have some cash on them when they go out in public, compared to 42% of consumers who don’t care whether or not they have cash with them when they go shopping.
Hurricane Ian certainly points to the vulnerability of electronic payments in the event of a natural disaster.
“When the power goes out and computers don’t work, we still need cash to do business, whether it’s to get essentials or buy gas for a generator or to get to work,” said Gerard Filitti, senior counsel of the Lawfare Project. “One must also remember that not all disasters are of natural origin; Wars and instances of domestic instability demonstrate the need for cash (preferably in US dollars) as a vital asset.”
Other payments experts point to the darker shadows of the US economy, particularly financial fraud. In these scenarios, cash is king over digital payments.
“One of the fastest growing crimes growing the fastest in America is identity theft,” said Levon Galstyan, Oak View Law Group’s Certified Public Accountant. “This is strongly related to the increasing use of electronic payment methods and the storage of financial information online.”
The strongest defense against identity theft in some financial transactions, possibly even with some businesses, is paying with cash, Galstyan noted.
“The advantage of using cash is that there are no paper trails,” he said. “Cash essentially eliminates the potential for identity theft because no information is left with the seller or merchant, although it can reduce the chance of recovering a faulty or substandard good or service.”
Cash also protects consumers worried about transactions in a world where consumers are increasingly being monitored (and monitorable) on their day-to-day spending.
“Whether it’s a personal indulgence you want to keep secret or a medical procedure that some (but not all) states ban, there’s a level of comfort in spending at least part of your life in relative privacy,” Filti said.
How much cash should you carry around?
While the digital payments sector is making huge strides compared to cash for commerce, US consumers who care about lining a wallet or purse with cash may be wondering how much cash they actually carry around these days.
After all, you never know when a merchant will want cash via digital payments.
On a daily basis, $20 is a good number for small “expenses” like picking you up at a garage sale, tips after 18 holes of golf, or after you’ve done your nails. Depending on your lifestyle, target what you really need — say $100 or more in cash if you tend to have higher incomes and tend to spend more.
“I always make sure my wife and I have $100 in cash on hand at all times,” said Jay Zigmont, founder of Childfree Wealth. “It may be old-fashioned, but cash can help you in emergencies and give you bargaining power.”
For example, a storm knocked out credit card machines at the local gas station, but they were still selling gas for cash, Zigmont said. “Having cash on hand meant we could get gas for our cars and generator while others couldn’t,” he told TheStreet.
It’s not just about having cash on hand. It also makes sense to have a few bills at home.
“It’s safer to carry between $100 and $300 in cash in your wallet,” Galstyan said. “But also keep a backup of about $1,000 at home. Depending on your spending habits, a few hundred dollars may or may not be enough to cover your daily expenses. Therefore, have $1,000 to $2,000 in cash on hand if banking services are suspended due to a sudden event such as a disaster or national emergency.”
Cash not yet available for the Count
Cash works best at a flea market or on a big city street, like buying a hot dog from a vendor.
“That’s partly because a cash transaction provides a level of security that if your card number or bank account is compromised, your daily life won’t be disrupted,” Filitti said.
In that regard, cash is far from dead.
“Whether it’s a few hundred dollars in a wallet for incidentals or a few thousand dollars in a safe for a real emergency, there’s still significant value in having cash on hand,” Filitti noted.