- The Washington Times - Monday, December 26, 2005

More Americans favor credit and bank cards over cash


K athy Dodd stood a few steps away from the Mary Tyler Moore statue on the Nicollet Mall in Minneapolis. She had flown in from Washington, D.C., for a few days on business and had arrived at the local icon’s feet at lunchtime.

Even though she was 1,100 miles from home, she had just a dollar or two in her purse, and three bank and credit cards.

“My dad carries a lot of cash,” the 26-year-old marketing consultant said. “I don’t carry any. We have big arguments about that.”

Long predicted and long delayed, the moment when America turns its back on currency and coins now seems nearer than ever. Blame it at least in part on a generation of young people more accustomed to gift cards than $20 bills.

“If you want to know what the payments world of the future looks like,” said David Evans, co-author of “Paying With Plastic,” “watch what people under 30 are doing.”

In the past year, the number of people reporting that they pay for things primarily in cash sank by 20 percent, while those who use mainly debit cards nearly doubled.

As promising as the new era is for some, it also comes with costs. It turns out, for instance, that when people get to pay with plastic rather than real bills in fast-food joints, they are tempted to buy and eat a lot more.

At Wendy’s, for example, that translates into 35 percent more, a study shows.

The growth of credit card databases recording our every movement worries many. So does the ability of banks to take a cut of all the electronic transactions in ways they never could with cash. Lawsuits accusing them of exploiting their position are multiplying.

Linden Hills Co-op in Minneapolis is pleading with its member-owner-customers to think twice before whipping out the card, considering that transaction costs now add up to twice the amount of the co-op’s entire annual profit.

“It eats into our bottom line,” said General Manager Paula Gilbertson. “And there isn’t much of a bottom line in the grocery business to start with. They’re taking money out of their own pockets.”

The temptations to use plastic are many.

“I don’t like credit cards,” said Michael Lyght, strolling down Nicollet Mall. “I’ve seen a lot of people hung by them. If you can’t pay for it, you don’t need it.”

Cash isn’t disappearing altogether, but plenty of signs show that a corner has been turned. The combination of mass acceptance of credit and debit cards and their proliferation in wallets creates its own momentum.

More and more, analysts say, lines in stores are hastened by the swipe of plastic, making it essential for companies such as Caribou Coffee to respond by issuing their own cards to help keep things moving.

“And we’re testing a wireless system that allows cardholders to step right out of that line altogether,” added the company’s top executive, Michael Coles.

True enough, we’ve heard the “cashless society” song before.

“Credit cards now are used by so many people that some wonder if cash is going out of style,” U.S. News & World Report announced — in 1958.

But consider:

• The laborious writing of checks at supermarkets, combined with the patient recording of them in the register, is sinking fast. Of every 100 such occasions in the year 2000, it is predicted, 70 will vanish by 2009. Deluxe Corp., the king of the check, is down from a 1990s peak of 60 printing plants to fewer than 20 today, and is shutting more plants.

• Although plenty of cash remains in circulation, a lot of it is $100 bills in foreign hands, as a form of security. The number of $10 bills in the wallets of ordinary shoppers has barely budged in the past decade, Federal Reserve statistics show.

Some groups mourn the coming state of affairs — none more so than the Professional Numismatists Guild, the folks who collect and study currency.

“People debate what designs should be on our coins and paper money,” the group’s fact sheet states. “Whose portrait do you want on your Visa card?”

The folks at Visa say that rising use is its own answer to such objections. All three players in the game are benefiting, said Paul Cohen, a vice president of Visa USA.

“Cardholders get security, convenience and rewards,” he said. “Merchants get guaranteed payment, back-end accounting and increased sales. Banks get stronger relationships with cardholders.”

• Distributed by Scripps Howard



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