10.04.2007
Welcome to cashless America
When the cashless revolution finally succeeds, the homeless guy who hangs outside my office probably will have to find a job. This occurred to me as I passed by his outstretched hand last week.
Normally, I’d drop a few coins into his beat-up paper cup. But I’d given up using real currency for a week as an experiment, to find out just how close we have come to the post-cash era.
I didn’t bother asking Homeless Guy if he took plastic, since A) the answer seemed pretty obvious and B) I didn’t want to interrupt the conversation he was having with himself.
Every year, for nearly three decades, economists and futurists have told us that we sit on the cusp of a cashless society, where money will exist only as a stream of electrons, not on paper. And every year, we keep lining up for ATMs and pulling a fiver out of grandma’s birthday card.
The volume of these predictions has increased in recent years with the emergence of new technologies like the combo cell phone/wallet - which, like your buddy’s band, is big in Japan, if not America.
A recent study by ACI Worldwide predicted that electronic payments will double by the end of the decade as consumers grow more accustomed to paperless transactions.
But we’re not there yet. It was only in 2004 that electronic payments for the first time outnumbered cash payments, 55 percent to 45 percent, according to the Federal Reserve. The Fed just announced plans to examine the current mix.
The percentage of electronic payments is likely to be higher now, but as my week-long cash hiatus confirmed for me, it’s almost impossible to live totally cash-free in 2007. (For a detailed accounting of my cash-free week, including a video, check out http://firststeps.mgblogs.com)
That’s a shame. I hate cash. Not Johnny Cash. He’s great. I wish paper and metal currency had died, and he were still around, instead of vice versa. I live as close to a cash-free existence as possible.
You should too. The problem with cash is that it costs too much.
That sounds odd, I know, like saying the problem with spicy food is that it is too spicy, but stick with me.
It has a high convenience cost. Unless you have free ATM usage, in most cases you must spend your money in order to obtain your money. Banks raise these fees every year. If you (stupidly) hit up a check cashing place on payday instead of relying on an ATM, you’ll pay even more.
There’s also a huge information cost. With a monthly credit card or debit card statement, I know exactly how much I spend. I know where my problems are. For me, it’s restaurants - and I’m not alone. A recent survey by Visa found that people in their 20s spend more on eating out than anything else but rent.
Let’s not forget the missed opportunity cost. Using credit cards for every transaction provides more airline miles, points, or “cash” back. A $20 bill only gives you the germs of the last person who touched it.
There are problems with a totally electronic existence. Unless you know how to use a credit card responsibly - as a tool of convenience and not as a loan - and pay it off every month, then you invite trouble.
Credit always leaves a trail. If you buy certain things that you’d rather the government, your spouse and the guy who steals your mail not know about, cash is a better choice.
I suppose we’ll know the cashless revolution has finally arrived when drug dealers, gun runners and that homeless guy on the corner start accepting PayPal.