Cold, hard cash could be going by the wayside for many Americans when it comes to routine transactions like paying for groceries or gas. Even so, it’s still important to keep some cash in your wallet, experts say.
The cashless economy trend is not necessarily new, but it is gaining momentum, according to new research from the Pew Research Center.
The nonpartisan fact think tank found 41% of Americans say none of their purchases in a typical week are paid for in cash. That’s up from 29% in 2018 and 24% in 2015.
In contrast, 59% of respondents say they still pay for at least some of their typical weekly purchases in cash.
Meanwhile, those who say they use cash for all or almost all of their weekly transactions in a typical week is now 14%, down from 18% in 2018 and 24% in 2015.
The results are based on a broader survey of 6,034 adults conducted in July that looked at people’s experiences with money, shopping and investing.
The poll did not delve into what other forms of payments people prefer in place of paper currency. However, in a separate report Pew Research Center has found payment apps like PayPal, Venmo, Zelle and CashApp have been gaining traction particularly with adults under 50.
Who’s most likely to pay in cash
Certain demographics tend to turn to cash more than others.
Adults 50 and up are more likely to say they always have cash on hand, with 71%, versus 45% of adults under 50.
More than half of adults younger than 50 — 54% — don’t worry about having cash on them, in contrast to 28% of consumers 50 and older.
Black and Hispanic adults were also more likely to say all or almost all of their weekly purchases are paid for in cash, with 26% and 21%, respectively. Just 12% of white respondents said the same.
“Even though we see a shift that more and more people are forgoing cash, there are people who are still reliant on that,” said Monica Anderson, associate director of internet and technology research at Pew Research Center.
People who tend to use cash also tend to have lower incomes. Those who use cash for all or most of their weekly purchases is 30% for those with household incomes below $30,000, versus 20% for those with incomes between $30,000 and $49,999 and 6% among households with incomes of $50,000 or more.
The Covid-19 pandemic was thought to accelerate the transition to contactless payments as more people took precautions.
“These are trends that we have seen shifting even before the pandemic,” Anderson noted.
Most don’t need more than $50 in their wallet
Still, there are times when only cash will do, such as when a businesses only accepts currency or you want to give someone a tip.
“While it comes down to personal preference, I’d say that most people probably don’t need to carry more than $50 in cash,” said Ted Rossman, senior industry analyst at Bankrate.com.
“In fact, many could probably get by with $20 or less,” he said.
Cash is good for two things: privacy and anonymity, according to Rossman.
Moreover, for the estimated 5.4% of households who are unbanked, cash transactions are crucial, he noted.
Most people prefer credit or debt cards as their payment methods, according to Rossman. Credit cards in particular offer rewards, buyer protections and convenience. Because of that, Rossman said he is a “big fan” of that payment method.
But those advantages only pay off if you’re able to pay the balance in full every month and avoid the high interest rates those cards charge, Rossman said.
Credit card interest rates are becoming more expensive as the Federal Reserve hikes interest rates in an effort to curb record high inflation.