The Economic Consequences of Using Less Cash

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Transcript

00:00To all the Gen Zers who think cash is cringe, and that's 29% of you according to a new study,

00:05I have one thing to say. You are absolutely right. Cash also takes time to get from the bank,

00:10it carries a greater risk of theft, and digital payments make tracking your spending much easier.

00:15They've just become the norm, even for small purchases, as this chart shows.

00:19This shift is happening fast, and it could affect the economy in some not-so-small ways.

00:24In 2024, only 17% of respondents to a Federal Reserve survey said that they preferred cash for in-person transactions.

00:32That's down from 27% in 2016.

00:35Older and lower-income Americans are still more likely to use cash, but even for them it's becoming less common.

00:41All of this has two main implications. First, consumer spending might increase.

00:44The evidence is mixed, but people do tend to spend less when they use cash,

00:48because it makes them more aware of what things cost, and they can only spend what fits in their wallets.

00:52The second effect is potentially more federal and state regulations of digital transactions.

00:58Some members of Congress are taking aim at credit card fees,

01:01and the Genius Act means that stable coins may replace credit cards, but cash will never totally disappear.

01:06Like gold, it satisfies a deep primal desire for security,

01:10just in case things go horribly wrong, like the whole global economic system crashes, or the power grid goes out.

01:16According to the Fed, 4 out of 5 Americans still have some cash on them,

01:20and 9 out of 10 say they have no plans to give it up.

01:22And that's their right, just as it's mine to judge them when they're ahead of me in line.