The "Costs" of Going Cashless

Apr 08, 2019
Payment Types


Did you see last week's FinCap Friday on Disappearing Dollars?

Here is a bit more on the topic.

Earlier in March, Philadelphia Mayor Jim Kenney signed a bill into law that requires brick and mortar stores1 and restaurants to accept cash, becoming the first city in the US to ban cashless stores. New York, San Francisco, Chicago and Washington DC are all reportedly considering similar measures. The New Jersey legislature has passed a cashless ban also, and if the Governor signs it into law, New Jersey will join Massachusetts, the first state to require stores to accept cash. Interesting enough, the Massachusetts law was passed in 1978!

Establishments that do not accept cash cite many benefits.

  • Transactions are quicker as employees don’t have to make change.
  • Employees don’t make mistakes making change, (and can’t pocket it either.)
  • With no cash on the premises, the risk of theft is eliminated.
  • There is value in the data collected with each transaction.

Bottom line, it’s mostly about the bottom line. As most people these days pay with plastic (or their phones), the benefits of going all the way outweigh the incremental transactions costs (merchant fees).

So what are the concerns that have driven these cities/states to consider cashless bans? Several articles written on this development last week list the same things. (NPR, WAPO, NYT) The Wall Street Journal article included the graphics used in this article to shed some light on the arguments.

First and foremost, the concern is that cashless stores will no longer serve the “unbanked” portion of the population. This group is almost entirely comprised of folks in lower income brackets. In Philadelphia, 13% of the population is unbanked, roughly twice the regional average. While the unbanked could theoretically purchase prepaid debit cards to use in these situations, the fees attached to these cards make it a very expensive work-around.

Another group of folks excluded from these establishments are people who simply prefer to use cash. This would likely include folks from an older demographic. There is still a portion of the US population that prefer to do business in cash, and some who may be using the “envelope” method of budgeting and not Mint. Statistically, people are more likely to prefer using cash for smaller transactions – like for lunch or coffee, which are the establishments most likely to go cashless.

There are also people who would prefer privacy and anonymity in their commercial transactions. These days, you buy a particular salad at Sweet Greens, the info hits the ether and you are bombarded with ads from their competitor by the time you sit down to eat it! 

The world is moving in the direction of cashless. The US is trailing behind Sweden, India and China in this regard. I posted this WSJ article about how China is moving to “cashless” over a year ago. Even in developing countries, mobile payment systems like M-Pesa are hugely popular.

What will have to happen to make the US a cashless society that works for everyone? Is it inevitable that we will end up there?

One interesting work around can be found at the Mercedes Benz Stadium in Atlanta, which just went cashless this season. (AJC) All of its vendors are now cashless. Think of how precious time is when you run out for that hot dog and miss an incredible play! Vendors charged whole dollar amounts for every item to help speed things up, but the new cashless policy has meant the price has dropped 50 cents on several items, including HOT DOGS!!! For those without credit or debit cards, there are ten kiosks in the stadium that issue prepaid debit cards at zero cost. And if you don’t spend all of the prepaid card’s value at the stadium—no worries: the cards will work anywhere that accepts prepaid cards.

This issue might make for an interesting classroom debate!  Would the end of cash imply any changes to what/how you teach?


1 All legislation being considered includes exclusions for online transactions, transactions on airlines, parking garages and lots, and membership clubs.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an M.B.A. in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducting student workshops, and developing finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.