Tuesday, March 17, 2020

econlife - Where People Prefer Non-Cash Transactions by Elaine Schwartz

Last week, Washington D.C. started pondering whether to prevent businesses from becoming cashless. Philadelphia, New Jersey, and San Francisco have already said that retailers need to accept cash payments. In New York City, a ban will soon go into effect.

After this photo was taken in San Francisco, the city said businesses could not refuse cash:

Countries That Like Cash Transactions

You can see that Sweden, at 20 percent, is close to the bottom of the list. In 2018, just 13 percent of the Swedes surveyed said they had used cash for a recent purchase. Businesses say non-cash transactions save time. The one group that gets short changed are those who have no credit cards nor bank accounts:

Non-Cash Transactions

Recently, Visa offered 50 small U.S. food service businesses a $10,000 award to assist a move toward cashless transactions.

As Visa hopes, a 2019 San Francisco Fed study indicates we could be moving in a cashless direction. Predictably, we are using cash for “small value” purchases, mostly those that are less than $25. It also depends on your age. Individuals 18 to 25 and over 65 have more of a tendency to pay with cash. But the trend is down from 30 percent of all transactions in 2017. For the three consecutive days during October covered by the study, participants used cash for 26 percent of all their transactions.

Represented by green, cash transactions are diminishing:

We use cash more typically for gifts and payments to friends, family, and others, but not our household expenses:

Our Bottom Line: Money

Cash is not the only kind of money. To be defined as money, a commodity needs three basic characteristics;

It should be..

  • a medium of exchange (people accept it)
  • a store of value (it retains it spending power)
  • a measure of value (people know what it can buy)

As a result, demand deposits and the bank accounts accessed by a debit card are also money. So, even if a city permits businesses to ban cash, they still could be accepting money.

My sources and more: It’s always so nice to discover a synergy between articles. For that synergy, I suggest this NPR article and a San Francisco Fed report.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.