Federal Reserve reports sharp decline in US cash use during Covid-19 pandemic • NFCW

DECLINE: Cash use has dropped and credit card use has increased, at all household income levels during the pandemic

The total number of payments in the United States made in cash fell from just over one in four in 2019 (26%) to less than one in five in 2020 (19%) before increasing slightly to 20 % in 2021, reports the Federal Reserve.

The 2021 Consumer Payment Choices Reserve Log also reveals “a statistically significant drop” in the number of consumers who cited cash as their preferred method of payment for in-person transactions from 23% in 2019 to 19% in 2021. , an overall decrease of eight percentage points compared to 27% in 2016.

At the same time, the proportion of payments made by credit or debit card increased from 54% in 2019 to 55% in 2020 and 57% in 2021, with the percentage of consumers citing credit and debit cards as a method of payment. preferred payment reaching 32%. % and 44%, respectively, in 2021.

“Consumers reduced their share of cash use at all ages by a statistically significant amount compared to 2019,” the researchers say.

“Consumers under 45 used cash for less than 20% of payments; older consumers used cash for more than 20%. »

The Reserve also found, however, that cash usage remained higher in lower-income households, saying that “in 2021, the share of cash usage for consumers in households earning less than USD 25,000 was about three times higher (36%) than those living in households earning more than USD 150,000 (11%). »

Payment behavior

According to the report, the overall decrease in the use of cash in the United States during the pandemic is due to the following factors:

  • Consumers shopped in person less, leading to a lower share of in-person payments overall and fewer opportunities to use cash in 2020 and 2021 compared to 2019.
  • Fewer consumers reported a preference for using cash when making in-person payments, reducing the use of cash for in-person purchases and peer-to-peer (P2P) payments.
  • The use of P2P payment applications has increased, leading to a decrease in P2P hand-to-hand payments.
  • Changing daily shopping habits resulted in lower small value payments of less than $25 in 2020 and 2021 compared to 2019.

“The 2021 Journal findings reflect the continued impact of the pandemic on consumer payment behavior,” the researchers add.

“Although total payments, cash payments and the number of in-person payments in 2021 all increased compared to 2020, these increases were not statistically significant.

“A key finding of this year’s study is that cash use has declined and credit card use has increased for consumers at all household income levels throughout the pandemic.

“The only exception was consumers with household incomes below $25,000, whose use of cash was consistent before and throughout the pandemic. These consumers represent almost 20% of the US population, so a significant portion of the US adult population remains dependent on cash for everyday payments. »

The 2021 Journal results are based on a survey of participants who reported all of their payments made over a three-day period, the value of their cash holdings, the payment instruments they adopted and their preferences for different types. payments in October 2021.

A survey by a division of WSFS Bank found that two-fifths of US consumers still listed cash as their preferred method of payment in September 2021.

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