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Cash continues to lose "power", but why are so many banknotes still printed?

2024-02-28 11:49:35Biznes SHKRUAR NGA REDAKSIA VOX

Cash continues to lose "power", but why are so many banknotes still

A 2023 study conducted by the US Federal Reserve found that credit cards were the most preferred form of payment for US consumers, accounting for 31% of all payments. Next comes the debit card with a share of 29%, followed by cash in third place, accounting for 18% of all transactions.

This represents a steady decline in cash payments since the pandemic in 2020, which saw many changes in consumer behavior, including the acceleration of online shopping.

In 2019, 26% of payments were made in cash. A year later, the study showed that cash accounted for 19% of payments and has not recovered since. But this has not stopped the continued reversal of paper currency in the US.

Federal Reserve data show that the volume of currency in circulation has only increased since 2002. Every denomination, including less common bills like the $2 bill, has increased in circulation, from the simple dollar to $100. On December 31, there were 54.1 billion notes in circulation compared to 22.9 billion notes in 2002.

Economists say that despite increasing reliance on cards, cash remains resilient and an important payment method for many consumers.

Underbanked consumers often refer to people with bank accounts who rely on alternative financial services, such as non-bank money orders or payday loans.

Analysts note that cash also tends to be a preferred payment method for smaller purchases under $10 or hard-to-justify items, referring to purchases that are not necessary, such as a water bottle with high price at an airport or cigarettes.

Consumer demand and trends in payment methods are not the only reasons why the US government continues to place orders for paper currency. Another reason is to replace money that is already in circulation and has been damaged.


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