February 23, 2024

In an era of unprecedented digital payment methods, cash is making a comeback thanks to the rising cost of living.

a survey commissioned credit karma Surveys conducted by Harris Poll in March showed that 53% of US adults and 46% of UK adults use cash more now than they did a year ago. That’s 19 and 4 percentage points, respectively, higher than those who said they didn’t use it very often. About three-fifths of cash users in both countries say using physical currency reduces their spending.

The change in habits after decades of declining cash use illustrates the lasting impact of the fastest inflation since the early 1980s.The tightening has been particularly severe in the UK, where price gains remain above 10%, the central bank’s chief economist said. sparked heated discussions on the Internet This week, after saying Britons “need to accept” they were worse off.

“As the post-pandemic world is returning to normal and prices have risen sharply, we believe cash is one of the most durable ways to manage money,” said Courtney Alev, associate director of product management at Credit Karma. It really transcends generations and financial situations.”

In part, the reversal in preference is also a reaction to the proliferation of digital payment methods — from Apple Pay to Venmo to contactless credit cards — that some consumers say can easily blow their budgets. More than two-thirds of the 3,171 respondents to a Credit Karma survey said the payment method allowed them to spend more than they expected.

young people are adjusting The “Cash Stuffed” Trend Reflected in vibrato video Have financial tricks like separating your spending cash into different envelopes for different expenses.Consumers also start social media Boycott businesses that don’t accept cash.

“A lot of the theory about payments is about removing friction,” says Natalie Ceeney, chair of Cash Access UK, a group set up by the UK’s banking and building societies to promote the widespread use of cash after legislation to stem its decline. “In fact, a lot of people want friction back.”

Research shows that when consumer-facing businesses, such as stadiums, switch to contactless payments, sales increase significantly, she said. “One of the reasons is that people are more likely to just click and buy something without thinking, ‘Oh my god, that’s a lot of money.'”

Emily O’Donnell, from Lichfield in central England, switched to cash-only in November after she came across a TikTok video of cash stuffing. Until then, the 26-year-old had been living paycheck to paycheck. She has since paid off £7,000 ($8,740) in debt and started saving for a house deposit.she also post video on social media platforms about the budget.

“The discipline comes from building accountability on TikTok and having a very intuitive budget binder because I’ve never done a budget before,” she said.

underground economy
Kenneth Rogoff, an economist at Harvard University, said the rebound in cash use may partly reflect increased demand for what he called “underground economy services” — such as cash payments to babysitters to avoid taxes.

“It’s quite possible that the underground economy has grown during the pandemic, and the cash usage numbers reflect that,” he said.

rogoff, author The Curse of Cash: How high-denomination bills aid crime and tax evasion and constrain monetary policy, a part of the economy estimated to account for 10 percent of U.S. gross domestic product and more in Europe.

Cash use has bounced back from pandemic lows, Credit Karma findings show federal reserve And the Bank of England, may not just be a temporary blip. The survey found that the increase in cash use is particularly pronounced among young people, including millennials and Gen Z.Meanwhile, central banks around the world, including the Federal Reserve and the Bank of England, are pushing ahead with Plans to develop a digital version of its currency.

The Bank of England said in October that it had seen a “sustained, if partial, recovery in the use of cash” since the pandemic, with banknotes in circulation remaining near record highs. Notes and coins remain vital for low-income households struggling to cope with soaring costs on everything from milk to mortgages.

British bank Nationwide Building Society said in January that more than 30.2 million withdrawal Last year was made with its ATMs, up 19% from 2021.

The durability of the cash recovery may depend largely on the success of central banks in curbing stubbornly high inflation. But some fintech firms are already trying to adapt, rolling out features that help customers set spending limits.

Lisa Spantig, an assistant professor of experimental economics at the University of Aachen in Germany, said that while she sees frictionless payments as “generally beneficial,” some consumers may need help making informed decisions. This may ultimately require regulation, she said, “as providers of digital payments benefit from high spend rates”.

“For example, creating a system that alerts you when you’re about to buy into a budget category that you’re trying to reduce can be very powerful, especially compared to the ex post budgets that are currently available,” Spantig said.