The use of cash for making payments is becoming less frequent in the United States. A 2019 study conducted by the Federal Reserve found that cash is used in 26% of transactions, down from 30% in 2017. As more consumers move to payment methods that may seem more efficient, such as debit cards, many wonder if our country could be beginning the transition into a cashless society.
The United States is not the only place that could be moving away from the use of cash. Experts predict Sweden will become the first entirely cashless country in 2023. Although the idea to become cashless may seem practical with the declining use, getting rid of this form of payment would hinder the economy of any country that adopted this system, as well as having some other, less expected implications.
The idea of a cashless society has long been expressed in the age of technology, but, due to the fear of handling money contaminated with COVID-19, the shift has accelerated. The Center for Disease Control and Prevention released guidelines urging businesses to move to contactless payment methods during the global pandemic. Opting to use other payment methods may give consumers a feeling of safety during this time, but a long term transition should be avoided.
One of the drawbacks of most cashless payment methods is that they incur fees during each use. When accepting payments from credit cards, businesses are required to pay several processing fees to the card issuer to prevent fraud and make sure transactions are safe. Along with this, credit card users may have to pay interest if they miss a bill or cannot pay them in full. Due to this, both consumers and merchants may be spending more money than they would while using cash.
Another harmful effect of becoming cashless is the higher risk of fraud or hackers stealing personal information. Going cashless would require consumers to have more personal information online, opening them up to more possibilities of data breaches and their money getting into the wrong hands. The number of fraud reports are already increasing, and will only continue to go up if the country were to do away with cash payments.
Many also believe that the use of payment methods other than cash may lead to overspending. The physical act of parting with money gives consumers a feeling of “pain” that prevents impulse buys and helps them to save money. Although consumers may be becoming more familiar with using cards in daily life, it can be hard to view it as money, allowing yourself to splurge.
Finally, the main concern that many have with becoming cashless is the lack of financial security in the case of an account breach. With only one place where all of your funds are stored, consumers may be left with nothing in the event of theft. Cash gives the stability of having funds that can not be as easily compromised. Likewise, complications within technology could make it impossible to spend if a system crashes or other issues arise.
As of now, it is hard to know how imminent the transition to a cashless society is. According to a 2016 Gallop poll, 62% of Americans expect to see this transition take place in their lifetime. Citizens are becoming more familiar with not carrying cash, with 42% saying they feel comfortable without it.
As the shift to a cashless society seems to become inevitable, it’s crucial for consumers to know the possible consequences that could occur. Citizens must voice their support for our current monetary system to ensure their financial stability and wellbeing.
The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.