A cashless society makes payments easier – but not for everyone. Digital wallets and other contactless payments are leaving certain groups behind, creating a rocky future for those who can’t or won’t adapt.
If you’ve been shopping, dining or traveling, you’ve probably noticed that cash is not always king. Depending on where you are, credit and debit cards (whether in your wallet or on your phone) are accepted – but dollar bills and loose change may be denied.
Going cashless may not seem like a big deal to consumers who are active in trends such as contactless cards and mobile wallets (like Apple Pay and Google Pay). But for those who rely on cash, the cashless trend leaves them behind.
While the U.S. won’t transition to a cashless society within the next decade, many businesses have already begun embracing the trend – and will help determine if there will be an increase in places where cash is not accepted at all.
Glossing over the legal aspects of going cashless, the social ramifications need to be addressed, along with easily obtained alternatives that take everyone’s financial situation into account.
How the cashless trend affects those who rely on cash
Cash-only by necessity
Not everyone has credit cards or a checking or savings account that comes with a debit card. According to the latest Federal Deposit Insurance Corporation report, 8.4 million U.S. households are unbanked, which means no one in the home has a bank account.
An even larger number – 50 million – are considered underbanked. However, that isn’t much better, since that just means they use money orders, check-cashing businesses and payday loans. None of these methods will help when you’re trying to do something as ordinary as buy a coffee from a cafe or satisfy a bill at a doctor’s office. If the business refuses cash, you can’t pay for what you want or need.
So why not just get a bank or credit card? That’s not always so easy – or even possible. Those most commonly left out of the plastic and mobile payment world are:
Young children and teenagers frequent stores and eateries, but they often don’t have cards associated with bank and credit accounts. Of course, many have cell phones and app-based mobile payment systems, such as Zelle and Venmo, may be set up on the devices.
However, they still need an account, and unless the person is at least 18 years old, they’ll need their parents’ approval – which is not always available.
Previously incarcerated persons
When people exit the prison system, especially after serving lengthy sentences, they typically walk out with a little money in their pocket. And whatever bank or credit account they had prior to serving their sentence may have been closed.
So, before they navigate the system and open a new account or apply for a new credit card, that cash is all they have to use.
People experiencing homelessness
Relying on the generosity of others (among possible odd jobs), those experiencing homelessness heavily depend on cash. And it’s difficult to walk into a store to purchase something to eat when that establishment refuses cash.
“Many people without a fixed address are also locked out of the financial system and are reliant on the cash economy,” says Kate Crowhurst, director of the personal finance platform Money Bites. “Keeping cash as a transaction option means that people who are reliant on it are able to access a range of products and services.”
It can take a long time for a person new to the U.S. to set themselves up financially. It happened to Pratibha Vuppuluri, an immigrant from India.
Today, she’s a New York City-based consumer finance expert and chief blogger for She Started It!, an online resource guide for working moms. “There is often a gap before you move to the cashless world,” says Vuppuluri. “It can be an uncomfortable few months.”
People who’ve filed for bankruptcy
People who have turned to bankruptcy court to have their debts forgiven often have other financial problems as well. Before filing, they may have overdrawn their checking accounts so often that they’ve been reported to ChexSystems, a check verification service and credit reporting agency.
If that’s the case, they can’t open bank accounts until they clear the debt. Credit cards, too, may be out of the picture for a while. Until that time, tangible money will be the only payment tool they have.
Outside of not being able to make a simple purchase when cash is not accepted, it’s also discriminatory. Electronic-only payments puts anyone in these groups in the position of being a social outsider.
“It’s definitely a bad feeling,” says Vuppuluri. “You’re out of sync. It’s one thing to not use cash as a choice, but another when you have to use it out of necessity. When you can’t, you’re different from everybody else.”
Personal freedom to use cash
Even if you’re not closed out of the electronic payment world, being able to pay for something with the bills in your pocket is a matter of personal freedom. Some people deliberately eschew a portion of or even all card and mobile wallet transactions because it improves their lives.
“There’s actually a significant number of people who only use cash,” says Morgan Taylor, CMO and financial advisor for Let Me Bank – a company that helps people enter the banking system.
“It’s a method of financial discipline for them because they’re aware of exactly what they’re spending, and they can’t spend beyond what they have.” In fact, maintaining a cash-focused lifestyle can keep you out of financial problems.
Swiping a card or waving it over a point-of-sale terminal doesn’t have the same psychological effect as pulling money from a wallet and then visiting an ATM when you’ve run out. You may drain your checking account faster when you use a debit card, and if you’re using a credit card, an unintended balance can grow.
For this reason, money management approaches like Dave Ramsey’s envelope system are beloved. With it, you place cash in envelopes designated for certain expenses and stop spending when they’re empty, thus keeping you on budget.
Privacy concerns are another reason some people favor cash. Bobby Lee, a personal finance expert and consumer advocate, says it’s not uncommon – or unreasonable – to be wary of the constant tracking that occurs when using electronic payment methods.
“Your shopping profile is being monitored,” says Lee. “The beauty of cash is that it’s totally anonymous. No one knows what you bought or where you bought it but you.”
So, if you want to maintain total control over your purchasing habits and believe that what you buy is no one’s business but your own, cash is the way to go. And you’ll want to protect your right to use it.
Laws are changing
Several countries have already transitioned to a virtually cashless society, including Sweden, China, and the United Kingdom. In the U.S., federal law doesn’t require a business to take cash as a form of payment, but states and city governments can – and do.
Currently, cash must be accepted at retailers in New Jersey and Massachusetts. San Francisco, New York City and Washington, D.C. also restrict retailers from being totally cashless.
According to PaymentSource.com, many more states and cities are on the cusp of introducing their own legislation that will mandate cash acceptance. And the penalties for not following the law can be steep. In New Jersey, for example, fines start at $2,500 for a first offense and rise to $5,000 for every subsequent offense.
Still, the states and cities that have taken action against cashless retailers permit exceptions to the rules. Certain businesses can insist payments are made with credit or debit cards – such as parking garages, food trucks and medical offices. As a result, an account that allows for electronic transactions is unfortunately necessary for maximum purchasing liberty.
In the event you find yourself in a situation where a business or vendor does not accept cash (and that’s all you have), a prepaid card can come to your rescue.
“Anyone can get a prepaid card,” says Vuppuluri, “They’re good for people who don’t have bank cards but [need one] when a store won’t accept cash.”
There are no qualification requirements to get a prepaid card and they are often sold at retailers like Walmart. Simply buy a new card and have the cashier load it. Once done, you can spend as you would with any debit or credit card, and you can reload it at participating ATMs. Some cards, like Bluebird from American Express, even allow you to reload at Walmart cash registers for free.
You can even add the card’s account number to your mobile payment app so you can tap and pay as anyone else does. Since the payment processing company is usually Visa, Mastercard or American Express, prepaid cards are widely accepted.
However, many have fees for activation, monthly services and cash reload. While that seems to be just the “price of doing business,” some prepaid cards have fewer (and lower) associated costs, so shop around and read the fine print before choosing one.
See related: 9 things you need to know about prepaid cards
Another option is to enter the traditional banking environment and use it advantageously. If you can’t get a bank account because you’re on ChexSystems, clear up the problem by paying off the amount you owe (if you’re able).
Credit unions can be great places to start with a checking account. These non-profit financial institutions work with their members to improve their credit and money troubles. A secured credit card can help you jumpstart or rebuild your credit as well. However, a preliminary deposit is required, so keep that in mind when researching your options.
In the end, flexibility is important because some businesses can and do require electronic payments. Thankfully, not all businesses turn away cash and there are ways to deal with the ones that do. One day the U.S. may go totally cashless but, right now, you have rights and alternatives.