February 25, 2019
In recent years we have seen a rapid shift away from cash, both in the U.S. and around the world. Fewer people are using paper money, and the number of retailers cutting out cash and only accepting credit and debit cards and digital payment platforms such as Apple Pay and Google Pay is on the rise. But some states and cities are worried the move toward a cashless society is disadvantaging some people, and they are taking up legislation to address this.
According to a report in The New York Times citing legislation being worked on around the country, the New Jersey Legislature and Philadelphia City Council have backed laws that would ban cashless stores. New York City, Washington, D.C., San Francisco and Chicago are looking at similar legislation. This morning I thought we could discuss the trend toward cashless transactions, how it hurts some consumers, and what we can expect in the years to come.
While I am not sure we will reach a point of no cash, it certainly looks like paper money is destined to occupy a much smaller place in our economy and our lives in the future. According to the Federal Reserve, cash purchases were down to 30 percent of all retail transactions as of last year compared to 40 percent in 2012. A Gallup poll found that just a quarter of Americans made all or a significant number of retail purchases with cash in 2016, 11 percent fewer than those who did so just five years earlier. The switch away from cash is especially apparent among younger Americans. Just 21 percent of people between 23 to 34 years old reported most of their transactions were in cash, down from 39 percent five years before.
As you know Tom, to be unbanked means you do not have access to a bank account or other financial services, such as credit or debit cards. Many officials are concerned that cashless policies will have a disproportionate effect on those who are more likely to be unbanked – including immigrants, lower income families, and minorities – because they rely on cash in their daily lives. So while the number of consumers who prefer using cash is declining, there are still tens of thousands of people who may be further disadvantaged by cashless retailers because they don't have bank accounts or lack credit cards or photo identification. After all, while the number of people who are unbanked is declining, around 6.5 percent of households had no members with a checking or savings account, and 1 in 5 families has not used a credit card or mainstream credit tool such as a mortgage during the previous 12 months. So, states and cities are trying to put safeguards in place to ensure these individuals and families can still conduct business.
The fact is most businesses still accept cash, Tom. But, critics of these bills have argued that going cashless is more efficient and more secure. Many retailers note that the majority of their customers already pay with a card or payment app. Not only does this encourage efficiency – at the point of sale, when counting it, and when depositing it – a lack of cash also cuts down the danger of robbery or theft. Still, proponents of these new laws note that none of this addresses their core concerns.
The first thing is that it is in your interest to gain access to these financial tools. Not only is it more secure, it also allows you to build a credit history and can help you understand and benefit from the financial system in the long run. If you don’t feel like you have enough money to open a bank account, or if you have struggled financially in the past and are concerned you may not be eligible, I would encourage you to try a local bank or credit union. These institutions tend to have fewer requirements for account balances and account openings. If you are still having trouble, you may want to seek out financial counseling. The National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA) are great resources to begin the process.
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