Demise of Cash? Not According to FED Analysis

While many electronic payments pundits have been predicting the demise of cash for years, the data tells a different story. A new report from several Federal Reserve Banks, Cash Continues to Play a Key Role in Consumer Spending: Evidence from the Diary of Consumer Payment Choice, indicates that U.S. consumers use cash more often than any other payment method, including debit and credit cards.

Summary of key results:

  • Cash makes up the single largest share of consumer transaction activity, at 40%.
  • Cash dominates low-value transactions. Cash is used for two thirds of transactions less than $10, and for half under $50.
  • Cash is the leading payment instrument for 6 out of 9 expenditure categories studied, even where other payment options are typically available.
  • Cash is the key alternative when other options are unavailable (P2P for example).
  • Income exerts a strong influence on payment preference. Low income consumers use cash for a much wider variety of transactions and use cash much more frequently for bill payments. The preference for cash declines sharply once household income exceeds $25K per year.