I hate cash. I’m reminded of this every time I find myself in a cab where the driver claims he won’t accept my credit card, or when I’m at a restaurant that demands to be paid exclusively in paper bills -- incidents that happen far more often than is reasonable in an ostensibly advanced country.
Bloomberg News reports that paying in cash is normal, however, for people in Myanmar, although this is gradually starting to change. Now that sanctions have been eased, companies such as American Express Co., MasterCard Inc. and Visa Inc. are building the systems needed for electronic payments. (The biggest challenges are unreliable power supplies and a telecommunications network from the 1960s.) This is great news for Myanmar, but it is an unpleasant reminder that there are still vestiges of a backward cash-only society in the U.S. that ought to be stamped out.
Physical currency is dirty, it’s inconvenient and it abets crime. That’s why I stick to electronic payments whenever possible. Those eliminate the need to fumble about for exact change (or get stuck with worthless coins I never have occasion to use), lighten my wallet and make it easy to keep track of my spending. Nowadays even street vendors can accept credit cards thanks to technological innovation.
Americans seem to share my aversion to physical money. According to the Federal Reserve Bank of Cleveland, most U.S. currency by value is actually held in foreign countries. Cash accounts for just $1.8 trillion of transactions each year, while electronic payments, checks (who still uses those?), and cards account for a combined $71.7 trillion -- 40 times as much. Another $1 quadrillion in transactions is attributable to wire transfers, but those are mostly trades by the financial industry rather than anything directly tied to real economic activity.
Some vendors resist accepting cards because of the fees involved. This seems odd. Those fees can be passed on to customers pretty painlessly, which is why almost every civilized business happily accepts Visa and MasterCard. I, for one, would happily pay the few percentage points that vendors are charged to use the major payments networks if it meant not having to worry about whether I had enough of the right pieces of paper in my wallet.
A likelier explanation is that cash-only businesses have an easier time hiding income from the Internal Revenue Service. That also makes them excellent places to shield gains from illegal activities. Anyone who has seen “Breaking Bad” is well aware of how any small business that runs on cash can be converted into a vehicle for “cleaning” drug money. Italian banks have had such a hard time getting Italians to switch to electronic payments in part because, according to Bloomberg News, businesses there “often pay salaries in cash to evade taxes,” particularly in the crime-infested south.
If the government really wanted to push the U.S. toward a cashless society, it could stop printing new paper currency and minting coins. Inflation would erode the value of the existing supply while wear and tear would soon render most of it unusable. This could be complemented by changing the law preventing people from melting coins for their metal content. It wouldn’t be profitable right now, but eventually the prices of those metals may increase enough relative to the fixed value of the coins to encourage the voluntary destruction of my least favorite store of value.
(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter.)