America is loosening its grip on its centuries-old love affair with cash.
Whether it’s having a fistful of cash walking into a restaurant or casino, or just having some coins jingling in your pocket at the hardware store, the old ways of consumer payments are giving way to new ones – and at an accelerated pace.
Consider a recent Pew Research Center survey showing that 41% of Americans say none of their purchases in a typical week are paid for using cash. That’s up from 29% in 2018 and 24% in 2015.
“Conversely, the portion of Americans who say that all or almost all of their purchases are paid for using cash in a typical week has steadily decreased, from 24% in 2015 to 18% in 2018 to 14% today,” the report stated. “Still, roughly six-in-ten Americans (59%) say that in a typical week, at least some of their purchases are paid for using cash.”
Is Cash on the Way Out?
Most Americans still like having cash on hand when they head out the door.
The Pew survey stated that approximately 58% of Americans like having some cash with them in public, compared to 42% of consumers who don’t care if they have cash or not when making a purchase.
Certainly, Hurricane Ian points to the fragility of electronic payments in a natural disaster.
“When power is down and computers don’t work, we still need cash to transact business, whether to procure necessities or purchase gasoline for a generator or to get to work,” said The Lawfare Project senior counsel Gerard Filitti. “It’s also worth remembering that not all disasters are natural; wars and instances of domestic instability showcase the need for cash (preferably U.S. dollar-denominated) as an asset essential for survival.”
Other payment experts point to the darker shadows of the U.S. economy, especially financial fraud. In those scenarios, cash is king over digital payments.
“One of the fastest-rising crimes that are increasing the quickest in America is identity theft,” said Oak View Law Group Certified Public Accountant Levon Galstyan, a Certified Public Accountant at. “It’s strongly related to the rise in the use of electronic payment methods and the online storage of financial information.”
The strongest defense against identity theft in some financial transactions, possibly even with some companies, is to pay with cash, Galstyan noted.
“The benefit of using cash is that there are no paper trails,” he said. “Cash substantially eliminates the potential of identity theft because no information is left with the seller or merchant, even while it may lessen the chance of recovering a flawed or subpar good or service.”
Cash also protects consumers who worry about transactions in a world where consumers are increasingly monitored (and monitorable) for their daily spending.
“Whether it’s a personal indulgence that one wants to keep secret, or a medical procedure that some (but not all) states prohibit, there is a certain level of comfort in being able to live at least some of your life in relative privacy,” Filitti said.
How Much Cash Should You Carry Around?
While the digital payment sector is making big inroads versus cash for commerce, U.S. consumers who do value filling a wallet or pocketbook with cash currency may be wondering how much cash to actually carry around these days.
After all, you never know when a merchant may want cash over digital payments.
On a daily basis, $20 is a good number for small “spends” like a pick-up at a yard sale, as well as tips after 18 holes of golf or after getting your nails done. Depending on your lifestyle, aim for what you really need – say, $100 or more in cash if you tend to have a higher income and tend to spend more money.
“I always make sure that my wife and I have $100 in cash on hand at all times,” said Childfree Wealth founder Jay Zigmont. “It may be old-fashioned but having cash can help you in emergencies, and may 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 having cash in hand. Having a few bills at home makes sense, too.
“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 in your home. A few hundred dollars may or may not be sufficient to cover your daily expenses, depending on your spending patterns. Therefore, have $1,000 to $2,000 in cash if banking services get suspended due to a sudden incident such as a disaster or national emergency.”
Cash Not Down for the Count Yet
Cash historically works best at a yard sale or on a big city street, like getting a hot dog from a vendor.
“That’s partly because a cash transaction provides some measure of reassurance that your daily life will not be disrupted if your card number or bank account is compromised,” Filitti said.
In that regard, cash is far from dead.
“Whether it’s a few hundred dollars in a wallet set aside for incidentals or a few thousand dollars locked in a safe for a true emergency, there is still significant value in having cash on hand,” Filitti noted.
