Tuesday, January 13, 2015

Americans' cash-carrying habits

Quick, how much cash is in your wallet? If you’re like the average American, barely enough for a couple of movie tickets: The median consumer carries just $22.

A handful of people roll bigger. Roughly one in five people carry more than $100. One in twenty carry a pickpocket’s dream—$100 bills—according to a new study by Claire Greene and Scott Schuh of the Federal Reserve Bank of Boston. ...

The amount of cash in circulation keeps rising. There’s $1.2 trillion in cash outside banks, up 20 percent since 2011. Use of credit and debit cards is growing, too, but they’re mostly taking over where checks left off. Cash is still used for 40 percent of all purchases, and from 2003 to 2012 the amount of cash pulled from ATMs rose 32 percent faster than inflation. ...
In fact, people who carry around lots of cash aren't that different from anyone else, with one important distinction: They make more money. Consumers who make more than $75,000 are about 50 percent more likely to be carrying around $100 than those who make less than $35,000. That might not seem surprising—more money in the paycheck means more in the wallet—but it undercuts the idea that wads of cash are mainly for poor people who don’t have access to banks or credit cards. In fact, holders of more than $100 were more likely to have a credit card, though they tended to pay it off every month. They were also more likely to be older than 55 and have more than a high school education. Beyond those, the study concluded, “other demographic factors are not statistically significant.”

Most people use cash only to buy small things, and people with lots of cash are no exception. When spending their $100 bills, they’re usually asking a clerk to make change. The Boston Fed study tracked daily spending and found that 78 percent of $100 bills were used on purchases of less than $100. One-third of the time, they were using a $100 bill to buy less than $20 of stuff.
--Ben Steverman, Bloomberg Businessweek, on how far away we are from a cashless economy. HT: EP

And the classic clip on the use of $100 bills: