Cash or Credit: What Does the Future Hold?

When you think about paper or plastic, you may not be thinking about grocery bags.

An Amish horse and buggy moves slowly through the PNC Bank parking lot in Leola, PA and stops at the hitching post. An older woman in traditional plain dress climbs down from her rig, ties up her horse and walks into the branch.

Anna Oberholzer is visiting her local bank to have her credit card’s PIN number changed. Oberholzer is a life-long member of her Amish community and generally pays with cash for her purchases. But Oberholzer, and a growing number of her neighbors, also are using credit cards. She uses her PNC credit card for some transactions as a matter of convenience.

“It is better than writing a check because many stores do not accept checks from folks they don’t know,” Oberholzer said.

amish buggey at ATM
Amish carriage outside a PNC Bank in Leola, PA

Nathaniel Stoltenfus, an Amish dairyman from Leola, PA, manages a 50-acre farm with 50 cows to support his family. He uses checks for paying his bills and receives direct deposits for milk sales. But cell phones, smart devices and computers are off the table. Stoltenfus says “advanced technology is not allowed by church policy.”

His house has no electricity, and he uses gas for heating, cooking and lights. Besides growing his own feed and grain for his livestock, he also earns some additional income by leasing a small piece of his property for a cell phone tower.

Some communities, like the Amish, have relied primarily on cash for many decades and generally prefer this payment method. But that doesn’t mean they aren’t changing their banking habits a little bit with the times.

The Cashless Movement

Broadly, U.S. consumers have been moving toward a cashless society since the 1950s when some of the first modern charge and credit cards were launched. New mobile pay methods are simply an extension of those cards with traditional methods of payment underlying mobile and online payment services. Some brick-and-mortar retailers are going cashless in their stores. Online sales continue to grow.

While many consumers are attracted to cashless payment methods, research shows that younger consumers are climbing onboard at a much faster rate. Thirty-four percent of 18 to 29 year olds are now using mobile payments, versus only 16 percent of 45 to 59 year-old consumers, according to a 2015 Federal Reserve survey.

Paper or Plastic?

If your grocery store cashier asks “Paper or Plastic?” besides contemplating your bag preference, you also think about using the other type of paper or plastic – cash or credit card.

Despite the rush toward credit, cash still remains very popular. A 2014 study by the Federal Reserve showed that consumers use cash to complete 40 percent of transactions, particularly for purchases under $20. The study also showed that 30 percent of consumers prefer to pay with cash.

The Comfort of Cash

Currently, about $1.5 trillion in U.S. paper and coin are circulating around the world. For consumers, cash is an important part of doing business.

“You tend to be more frugal with cash,” said PNC Bank Economist Kurt Rankin. “People spend more with a credit or debit card than with cash. Whether it’s a four dollar cup of coffee or a $1000 suit, dipping or swiping a card is the same, but handing over that much cash could feel a lot different.”

For many consumers, holding onto cash has a comforting effect. It can be a precaution against potentially reduced access to card networks during natural disasters, power outages or computer network issues. Additionally, cybersecurity risks, identity theft and the potential for government intrusion have caused many consumers to prefer cash as a payment method.

While some consumers might rejoice at the thought of no more cash or coins, moving to a cashless society presents a number of issues and concerns for U.S. consumers, making it a less likely outcome in the United States in the near future. 

According to the Federal Reserve:

  • About $1.5 trillion in U.S. paper and coin are circulating around the world.
  • 34% of 18 to 29 year olds are now using mobile payments
  • 30% of consumers prefer to pay with cash

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