The global pandemic COVID-19 has increased Americans’ usage of debit/credit cards or mobile payment systems to purchase goods and services. As such, a number of businesses are no longer accepting cash as a form of payment in their establishments. This decline in acceptance of cash is hurting a great swath of people who live in this country.
In May 2019, the Board of Governors of the Federal Reserve System released their findings on the Economic Well-Being of U.S Households. The report found that, “Although the majority of U.S. adults have a bank account and rely on traditional banks or credit unions to meet their banking needs, gaps in banking access remain. Six percent of adults do not have a checking, savings, or money market account (often referred to as the “unbanked”). Two-fifths of unbanked adults used some form of alternative financial service during 2018—such as a money order, check cashing service, pawn shop loan, auto title loan, payday loan, paycheck advance, or tax refund advance. In addition, 16 percent of adults are “underbanked”: they have a bank account but also used an alternative financial service product.”
That equates to roughly one quarter of households in the United States.
Low Income Households Most Affected
The Fed Reserve’s report also found that, “The unbanked and underbanked are more likely to have low income, less education, or be in a racial or ethnic minority group. One percent of those with incomes over $40,000 are unbanked, versus 14 percent of those with incomes under that threshold. Similarly, 14 percent of blacks and 11 percent of Hispanics are unbanked, versus 4 percent of whites.”
Given that taking away the ability to pay in cash disproportionally affects lower income households, some local and state governments are now requiring businesses to accept cash as payment. Massachusetts and New Jersey have all made it a requirement that businesses accept cash. Additionally, San Francisco, Berkeley, and New York City are all now requiring the acceptance of cash. Many other municipalities and states are also considering passing measures to ensure that cash is an acceptable form of payment.
As more people have taken advantage of card or mobile payments during the coronavirus, the U.S. found itself in another kind of financial crisis – a shortage of coinage nationwide, which resulted in many businesses not being able to provide exact change to customers.
A Push for Legislation
To help mitigate this issue, the Consumer Federation of America and consumer advocacy groups recently sent a letter to members of Congress encouraging them to pass legislation, called the Payment Choice Act, requiring brick and mortar businesses to accept cash payments. The letter states, “The economic dislocations caused by the pandemic have fallen most directly and most harshly on the marginalized segments of our society: low-income populations, people in inner-city neighborhoods and in rural areas, the unemployed and underemployed, the elderly, and racial and ethnic minorities. It is crucial for people to be able to obtain necessities at their local stores and restaurants without being turned away because they want to pay with cash.
“Enactment of the Payment Choice Act will ensure that all consumers in the United States can make purchases in retail stores and restaurants using the payment methods of their choice. We appreciate your leadership on this important issue, and urge your colleagues in Congress to support this legislation.”
Considering that “Approximately 60 percent of in-person payments under $10 were made in cash”, it’s vital to ensure that the unbanked and underbanked in our society have the ability to fully engage in our economy by using cash to make purchases.