Should We Get Rid Of Cash?

January 8, 2024

Two generations ago, the main way to buy anything at stores and restaurants was to reach into your pocket and count out a bunch of bills and coins. By the 1960s, many Americans began carrying less cash as paying by credit card became widespread. And in recent years, new technology has brought on an explosion of ways to exchange money virtually. With so many digital payment options now available—from Apple Pay to Zelle—more and more people are simply leaving their wallets at home.

An executive at a digital payment company and an economist at a Washington, D.C., think tank face off about whether we’re ready to phase out paper money.

In recent years, people and businesses all around the world have been relying less on cash. Increasingly, many people prefer the safety, security, and convenience of making payments from their phones, tablets, and computers, or using contact-free devices in stores. And I believe this trend is here to stay.

The pandemic sped up this shift as people avoided handling cash out of health concerns and sent money electronically instead. As online shopping becomes more common, companies like PayPal are working to make digital payments easier and more accessible. Once the habit of paying digitally becomes established, people are likely to continue doing it, even after health-related fears fade.

Within two months of the pandemic’s start, the number of people using digital payments began rising at a rapid rate worldwide. In a 2022 Pew Research Center survey, 41 percent of respondents said they didn’t use cash for any purchases in a typical week—up from 29 percent in 2018. But that trend away from cash transactions was already happening before the pandemic, and it will likely continue.

Digital financial services are increasingly making cash unnecessary.

Digital financial services are helping to solve some of the hassles of paper money, like losing your wallet or waiting in line to get cash at an ATM. No longer limited to cash transactions, with a few taps we can split the cost of a pizza with Venmo or buy goods from merchants abroad. This supports small businesses and strengthens local communities everywhere.

Even in less-developed parts of the world that have traditionally had economies more centered around cash transactions, almost everyone has a cellphone these days. And that phone can enable people to access payment apps that increasingly make cash unnecessary.

While some uses for cash remain, I expect to see more people opting for digital payments to shop in safe, affordable, and convenient ways.

—FRANZ PAASCHE

Senior Vice President/Chief Corporate Affairs Officer, PayPal

Even as much of commerce and money moves into the digital age, paper money remains essential to millions of Americans for reasons of both privacy and inclusion.

Most digital payments require a link to a bank account. Nearly 6 million households in the U.S., including many young people and undocumented immigrants, have no bank account at all that would give them a free debit or credit card. Many more, including elderly individuals, have bank accounts but aren’t digitally savvy enough to feel comfortable with digital payments. So far, there is no reliable replacement for cash that would allow these often poor, vulnerable people without bank accounts to buy things.

Cash payments are free, compared with cards that charge merchants a fee to accept them. When cash payments aren’t possible—such as for Amazon purchases or Netflix subscriptions—people without bank accounts have to buy prepaid debit cards that charge fees when they are purchased as well as fees to keep the card active. Those fees add up and place an additional burden on people who are already struggling.

Cash remains essential to millions of Americans who don’t have bank accounts.

Plus, digital payment systems are linked to your identity. Eliminating cash would mean giving up some of our financial privacy, as the government and data-hungry companies could more easily snoop on our daily lives. Sometimes, for legitimate reasons, people want to pay for things without a record of their names, account numbers, and other personal information being created—and they should be able to do so.

There are other important benefits to cash too. For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase.

In short, getting rid of cash would impose hardships on society’s most vulnerable people and could jeopardize our privacy. That’s why we still need it.

—MARTIN CHORZEMPA

Senior Fellow Peterson Institute for International Economics