Americans cling to cash: 93% won’t abandon in-person payments
The Federal Reserve Bank and the Bureau of Engraving and Printing have taken unprecedented steps to meet the surging demand for $50 bills, as Americans increasingly seek to hold physical cash. In a surprising turn of events, the Bureau of Engraving and Printing reported that they produced a staggering 756.09 million new $50 bills in 2022, with a total value of approximately $37.8 billion.
Economic uncertainty drives demand
Despite the declining use of cash for everyday transactions, the San Francisco Federal Reserve Bank has identified a significant uptick in the demand for physical cash in the United States. According to the Federal Reserve’s Diary survey, this unusual trend can be attributed to economic uncertainty stemming from the lingering effects of the COVID-19 pandemic.
While the survey found that the average number of cash payments remains below pre-pandemic levels, the aggregate demand for cash has continued to soar. As of October 2022, the total value of the currency in circulation surpassed $2.23 trillion, marking a remarkable 28 percent increase compared to February 2020. Although the growth has slowed since 2021, the trend remains notable.
Consumer cash holdings on the rise
The Diary survey has highlighted that one of the primary drivers of this increased demand for physical cash is consumer cash holdings. This includes cash carried on one’s person (in wallets, pockets, or purses) and store-of-value holdings (cash stored at home, in cars, or elsewhere). Both measures have remained elevated compared to pre-pandemic levels, underscoring the importance of cash as a safety net during times of economic uncertainty.
In a survey conducted as part of the same report, a striking 93% of respondents expressed no intentions to abandon the use of cash. This stance creates a paradoxical situation where the popularity of credit cards and electronic payments has not diminished the demand for physical cash.
The report highlights that while electronic payments have become increasingly favored for online transactions, approximately one in five consumers still prefer cash for in-person purchases. This steadfast preference for cash in face-to-face transactions is a testament to its enduring role in the American economy.
The Federal Reserve’s findings emphasize the need for continued investment across the entire cash supply chain to ensure that consumers who rely on or prefer cash have continued access to it. Despite the digital age and the rise of contactless payment methods, cash remains a crucial payment instrument, particularly during times of economic turmoil.