Cash is still king in the United States, according to the latest data from the Federal Reserve. Nonetheless, cash is losing ground to plastic and electronic payment methods.
Based on the Federal Reserve report, cash made up 31% of all transactions in terms of volume in 2016. That number is down from 40% in 2012, according to a previous report. With the rise of cryptocurrencies as another digital cash alternative, you may be wondering if and when cash will no longer be part of our everyday lives. And, if you’re scratching your head thinking cash will never go away, here’s another fact: some countries have already started moving toward a cashless economy.
To stay on top of current trends and find out if cash is truly going by the wayside, read on to learn about changing payment methods in the U.S and around the world.
To be or not to be cashless
It’s hard to say for sure, but at this point, it’s hard to believe that cash will become universally obsolete. To illustrate, let’s consider a tale of two countries: India and Sweden. In India’s case, cashless likely isn’t the best bet, while in Sweden, cash may soon become a thing of the past.
India’s cashless woes
In 2016, India’s prime minister Narendra Modi announced that the country’s two most common banknotes — which, by value, accounted for 86% of the currency in circulation — would be banned.
But a year later, the demonetization made waves in the Indian economy, and the Centre for Monitoring Indian Economy estimated that 1.5 million jobs were lost in the first four months of 2017 because of the ban. According to a Bloomberg report, small and medium businesses in the country – which depend largely on cash transactions – took the brunt of the impact.
With about a year and a half of data to work with, it’s impossible to say if these consequences are an indication that cash is essential to India’s economy. But, as people have lost their jobs or businesses, this remains a cautionary tale to other countries that are considering going the same cashless route.
Sweden and the race to become the first cashless country
Sweden was the first European country to introduce modern-style banknotes in the 17th century, so it’s fitting that the Scandinavian nation may become the first country in the world to go completely cashless.
Like India, the country banned consumers from making payments with two of its popular banknotes. However, it continues to allow people to deposit cash into their bank accounts until the end of June 2018.
According to a report by Sweden’s central bank, Sveriges Riksbank, the ban is working. The proportion of cash payments in the retail sector fell from 40% in 2010 to 15% in 2016. What’s more, two-thirds of Swedish consumers say they can manage without cash. The report also states that more than half of the country’s bank branches no longer conduct cash transactions. Another report estimates that the country will become fully cashless by 2030.
In the U.S., Millennials aren’t ditching cash anytime soon
While you may think older generations are more likely to use cash than Millennials, you may want to think again. According to the Federal Reserve, Millennials and Generation Zers are actually more likely to use cash than Baby Boomers and Gen Xers.
It’s hard to say for sure why Millennials and Generation Zers prefer cash more than older consumers, but we have a few guesses. Take a look:
They don’t have easy access to credit cards
The Credit CARD Act of 2009 made it more difficult for college students to get credit cards. For example, credit card issuers are no longer allowed to advertise on college campuses, and they’re required to consider your ability to repay the debts you incur before approving your application.
Subsequently, many college students have a hard time getting approved, even for student-focused credit cards. This is because they either have no previous credit history or they don’t have sufficient income.
They want to avoid debt
Millennials grew up during the Great Recession when consumer debt hit an all-time high. As a result, they understand the consequences of living beyond your means, both on a macro and personal level.
What’s more: the student loan debt crisis has made it difficult for many to justify adding more debt. According to data from Student Loan Hero, college graduates are leaving school with $37,712 in student loans. As a result, even Millennials who may qualify for a credit card often choose debit cards or cash to avoid overspending.
They’re concerned about data breaches
Thirty percent of the data breaches that happened in 2017 included compromised credit cards, according to Javelin Strategy and Research. In addition, the Identity Theft Resource Center has already seen 21 finance-related breaches in 2018, making it difficult for young consumers to trust the system. Instead, they choose to stick with what they can hold in their hands: cash.
The future of cash is still secure
While Americans may be using less cash than they did five years ago, it’s hard to imagine cash going away anytime soon in the U.S.
And while cash still reigns king in America, you might as well save as much of it as much as you can while putting your plastic to work for you. To do this, enroll in Chime’s Automatic Savings program. This way, every time you use your Chime debit card, Chime will round up the transaction to the nearest dollar and transfer the round-up amount into your savings account. By taking advantage of Chime’s automating features, you can also start paying yourself first as you work toward achieving your financial goals.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.