Cash Convenience


People use cash widely despite having other payment choices

By James Carberry

Every day across America consumers use cash in routine transactions: $12 to pay for dry cleaning, $8.25 for a sandwich at the local deli or $10.50 for produce at the farmers’ market. Individually, these transactions don’t amount to much. What’s significant is how often they occur.

According to a 2014 report by the Federal Reserve System’s cash product office, consumers continue to use cash more frequently than any other payment instrument, including debit and credit cards. Cash plays a dominant role in small-value transactions, and it’s the key alternative when other options are not available.

“There are myths about cash: that it’s dying out or that we’re quickly moving to a cashless society,” says Barbara Bennett, an author of the Federal Reserve report. “Our report shows otherwise.”

Bennett says consumers traditionally use cash because it’s convenient and universally accepted. She is vice president and senior policy and strategy officer, Federal Reserve System’s cash product office at the Federal Reserve Bank of San Francisco.


The Federal Reserve System’s report, “Diary of Consumer Payment Choice,” conducted by the Boston, Richmond and San Francisco Federal Reserve banks, is based on data from an October 2012 survey of consumers’ use of cash. That month the average American consumer had 59 transactions, including purchases and bill payments.

At 40 percent, cash accounted for the largest share of consumer transaction activity, followed by debit cards, credit cards and other forms of payment. The average value of a cash transaction is only $21, compared with $168 for checks and $44 for debit cards.

Card versus cash. The debit card is the first choice of many consumers. About 43 percent of consumers prefer to use it, whereas 30 percent prefer cash, 22 percent the credit card, 3 percent the check and the rest other forms of payment. Yet consumers use cash more often than debit cards. That’s partly because consumers have a lot of low-value transactions.

About one-third of the average consumer’s monthly payments are for transactions of less than $10, and the consumer uses cash for two-thirds of those transactions. In fact, most consumers use cash for half of all of their transactions of less than $50.

Value of transactions. While consumers frequently use cash for lower-value transactions, they tend to use other forms of payment for higher-value ones. Consumers don’t write checks or make electronic payments very often compared with other types of transactions, but when they do use electronic payments, it’s often for larger purchases. As a result, electronic payments account for 27 percent and checks for 19 percent of the value of transactions, compared with only 14 percent for cash.