Paying with Cash Costs Americans $200 Billion a Year

Herb Weisbaum, Today, October 11, 2013

Electronic payments–by phone, card and computer–continue to gain market share. And yet, millions of Americans choose to use cash.

Some have no alternative; they don’t have a checking account. Some value the privacy they get with cash transactions or the psychological sense of security knowing that cash is always accepted. For some families, cash is cheaper than using credit and helps them control spending.

But there is a cost to using cash–in both time and money–that’s not always taken into account. Those costs include fees to use a check-cashing service, withdraw from a non-network ATM fee or access wages loaded onto a payroll card.

A new study by Tufts UniversityThe Cost of Cash in the United Statesputs that price tag at about $200 billion a year. This figure includes $55 billion in higher costs to businesses, $43 billion for U.S. households and $101 billion in missed tax revenue because of off-the books transactions. For the average American family, the cost of cash is about $1,739 a year. The authors characterize their estimates as conservative.


The report, based on a survey of 1,000 Americans, found that:

The cost of cash is higher for poorer and unbanked Americans

Someone without a bank account pays an average of $3.66 more a month than someone with a bank account.

“Those who are unbanked are four times more likely to pay fees to access their own money. That’s a significant difference,” Chakravorti said. “A lot of people have the idea that cash is a poor man’s best friend. We feel that the poor are actually getting screwed across the board. They’re definitely being hurt dealing with cash.”

The cost of using cash does not happen at the point of sale.

The added expense comes from the time and money it takes to get that cash. The average American spends 28 minutes each month (5.6 hours a year) going to the bank or ATM to fetch cash. And this doesn’t count the time spent waiting in line. The average fee to use a non-network ATM is now about $3.85 per transaction.

Other significant findings: African Americans are more than twice as likely as other racial groups to pay for access to cash. {snip}

A key cost factor is the way people receive their wages. Someone who is paid by payroll card (prepaid debit card) faced average costs more than four times as much as the rest of those in the survey. Those who had direct deposit or who received their pay in cash had the lowest fees.


The National Consumer Law Center (NCLC), an advocacy group for lower-income and other disadvantaged Americans, agrees that it’s important to give people access to the world of electronic payments, so they don’t have to rely on cash. {snip}



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