Financial Security Index: Cash’s cachet


At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

In yet another sign that cash’s cachet may be waning, a new Bankrate survey found that 2 out of 5 consumers carry less than $20 in cash on a daily basis.

Bankrate’s May Financial Security Index suggests that the good old greenback — the traditional currency for many consumers — no longer dominates like it used to.

The pockets of many Americans are now crammed with a bevy of alternatives such as debit cards, credit cards and smartphones with electronic payment apps. While cash isn’t going away anytime soon, experts say, the role it plays in the marketplace may change in an increasingly wired world.

The electronic payments industry “is doing a good job shifting people away from cash,” says George Peabody, a payments strategist at Glenbrook Partners, a payments research firm in Menlo Park, California. But, he adds, “Cash is going to be remarkably resilient. I’m not expecting cash to disappear anytime soon.”

Peeking into wallets

Consumers who opened their wallets to Bankrate’s review weren’t carrying much in the way of paper money. The survey found:

How much cash do you usually carry on a daily basis?


  • More than two-thirds of consumers carry $50 or less on a regular basis.
  • About 9 percent of those surveyed say they don’t carry any cash at all.
  • Six percent of those making $75,000 or more carry more than $250 in cash, compared with 2 percent of the overall population.
  • The amount of cash people carry with them is fairly consistent across different age groups.
  • Women tend to carry less than men. Seventy-seven percent of women carry $50 or less on a daily basis, compared with 61 percent of men.

It’s unclear why there’s a gender discrepancy in how much cash people tend to carry. Greg McBride, CFA, Bankrate’s chief financial analyst, suggests that some women “may prefer to carry less cash than men so as to reduce the risk of being a target for criminal activity.”

Petty cash

Hannah Cushman, a 22-year-old college student at the University of Missouri, is one of the people who tend to carry less than $20 in cash. For her, it’s a way to control her spending.

Watch Greg McBride’s analysis of the poll results.

“Cash for me is so much easier for me to spend,” Cushman says. “If I have a lot in my wallet, I’m immediately going to spend it.” Cushman adds that “$20 is enough to go out on the weekend or get lunch between classes, but not enough to go buy something crazy.”

Cushman works at an ice cream shop, Sparky’s, and once pocketed $50 in tips instead of depositing the extra cash into her bank account. She says having that cash in her wallet made her feel more flush, like she had more money.

She says she ended up spending more money that week, not only in cash but also on her debit card. “It’s a weird kind of wealth effect,” she says.

Joydeep Srivastava, a professor of marketing at the University of Maryland, says that feeling is common.

“If you’re carrying more, maybe you feel you have more, and you feel you spend more easily,” says Srivastava, who has studied consumers’ psychological behaviors when it comes to money and spending.

Srivastava says many consumers consider the cash in their wallet as petty cash. People take that $20 out of the ATM, he says, and then mentally write it off as petty cash that’s OK to be used for a latte or other small items.

“As soon as you draw it from the ATM, it’s like you’ve already spent it,” Srivastava says. “You don’t feel that pang of guilt of spending it anymore.”

Electronic payments

Many consumers also are relegating cash to the back of the wallet as they find reasons to rely on noncash payments instead.

Jason Oxman, CEO of the Electronics Transactions Association, says there are a lot of reasons why consumers have embraced noncash payments.

One important reason is security, he says. If a $20 bill gets stolen from your wallet, you’re out $20. In contrast, if someone fraudulently charges $20 to your credit account, you often don’t have any liability.

Terrence Casey, 27, of Havertown, Pennsylvania, says he once lost a wallet that had about $150 in birthday money. Since then, he’s tried to carry around less than $100 at any time. He says he tries to use cards to pay for most things.

Oxman says electronic payments can also be more convenient than cash because a credit or debit card is always in your wallet, whereas, with cash, a consumer may have to run to the ATM.

Plus, he says, electronic payments have worked hard to make themselves attractive to consumers for all kinds of transactions.

Credit cards have developed extensive rewards programs for buying anything from organic apples to airline tickets. Money transfer programs like PayPal and Google Wallet make person-to-person payments easier. Even Starbucks has entered the noncash market: The coffee giant allows customers to buy their morning java (and even tip the barista) with a scan of its smartphone app.

“Consumers are taking advantage of the fact that, with the exception of a few small-dollar transactions, electronic payments are so easy and ubiquitous that (consumers) are carrying little cash around,” Oxman says.

Cash continues on

Despite this, the demise of cash is not coming anytime soon.

“My sense is that cash will remain king, at least for a while,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

An April report from the Federal Reserve looked at consumer spending habits in October 2012 and found that cash is used more frequently than any other payment tool, although cash accounts for a relatively small share of the value of those transactions.

The report found that cash is the dominant payment form for low-value purchases, particularly for transactions worth less than $10. It’s the most common form of payment for gifts and other transfers to people, as well as for food and personal care supplies.

The study also found that cash plays an important role as a backup payment option when someone who tends to use a credit card, debit card or a check can’t use that option to pay.

“Cash still plays a very significant role in the consumer payments landscape,” the report notes.

More On Financial Security: