I’m so glad that my favorite CNNMoney writer only retweeted this story — I think that’s part of her job — and didn’t write it herself:
— Heather Long (@byHeatherLong) November 7, 2016
And now, the story:
by Patrick Gillespie | November 4, 2016: 2:32 PM ET
Americans still love cash more than debit and credit cards or checks.
Despite the growing world of credit cards, PayPal (Tech30), Venmo and the on-demand economy, cash is still king, according to a new report by Federal Reserve Bank of San Francisco’s Cash Product Office.1,
The next few paragraphs simply provide some gross statistics, and you can read them at the original; I don’t want to reproduce the whole story due to copyright limitations, and have deleted the paragraphs which present no problems.
And all those Millennials, who seemingly never have cash in their wallets, actually use it more than everyone else.
Americans aged 18 to 24 used cash in 38% of their payments last year, more than any other age group.
Low-income households — people who earn less than $25,000 a year — tend to prefer cash over other payment methods more than households with a high income.
I would lump the “Millennials” in with the lower-income households, because the problems with those paragraphs is the same.
- Bank accounts are not free: some lower-income people avoid bank accounts to avoid the fees involved with them.
- Lower-income people make ‘purchases’ which don’t really count for them. For example, if someone uses the Supplemental Nutrition Assistance Program (SNAP) cards, the successor to food stamps, that is not a purchase might not back on them, but on the government, and won’t count in the statistics. If their rent is paid by Section 8 or some other form of housing assistance, that isn’t a purchase they are making, and isn’t part of the statistics. For Millennials, too many of whom are still living with their parents, rent and groceries are not payments that they make.
As someone who has been poor, who has lived poor for more of my life than I care to remember, such considerations are just plain obvious. Mr Gillespie, the author, never included such considerations in his article. Given that this was an internet article, rather than something constrained by newspaper column inch restrictions, I find that a serious omission; it fails to inform his readers as to why the statistics are what they are.
When it comes to small payments, cash rules across all demographics. For payments of $10 or less, Americans used cash 66% of the time. While companies like Square () make small credit and debt payments easier, they still haven’t overtaken the greenback.
Going unmentioned — and I downloaded the article at 11:50 AM today, so the possibility exists that Mr Gillespie has updated it since then — is the fact that many smaller retailers will not accept cards for payments under $10.00. Credit and debit card payments are not free for retailers: they lose a small percentage to the bank card companies.2
This was a story not about dollars, but about transactions, and that is what makes it misleading. My mortgage payment is far more than what I spend for morning coffee and lunch every month, but I make only one mortgage payment, and around forty coffee and lunch transactions a month.3 I doubt that I am the only person around who spends his money like that. What we needed was more information on the median amounts of cash vis a vis credit or debit spending, to provide a better perspective on the story.
Cash payments are declining, as Mr Gillespie’s story concludes by noting, as places like gas stations and grocery stores have made it increasingly easy to pay with credit or debit cards, but these are places in which the transactions are usually larger than a few dollars, and it simply makes sense to do things that way. With self-service gas stations, pay-at-the-pump moves traffic along more quickly, and thus those devices help the businesses. However, Americans make a multitude of small transactions, and cash is simply more convenient for many of them.
- Though the referenced story is only four days old, the previous link leads to a 404 Not Found error. I left the link in, in case it becomes active again. ↩
- Anecdotally, the Bowmanstown Diner, where I get lunch a couple of times a week, is cash only: they will not accept either cards or checks. Conveniently enough, they do have an ATM at the diner, so that you can get the cash you need if you don’t have it in your wallet. That way, the diner not only avoids both bounced checks and debit card fees, but (probably) makes a bit of money on the ATM transactions fees. That’s pretty smart business! It should be noted that I live in a small town/rural area, and coffee and lunches are undoubtedly less expensive for me than in Manhattan, where the reporters for CNNMoney work, and it may be that debit cards are simply a preferred way of paying for such things where they spend money. ↩
- Subtract one lunch: I brought leftover chicken from last night’s supper for my lunch today, so nothing from the diner for me at noon! ↩