Dive Brief:

  • Consumers’ cash use remained steady last year, even while they pulled out credit and debit cards more frequently, as the overall number of payments increased during a three-day period in October when the Federal Reserve conducted its annual cash use survey.
  • Consumers used credit cards for 32% of their payments, debit cards for 30% and cash for 16% during the period last year, the Fed report published last month said. They used automated clearing house payments 13% of the time, checks 3% of the time and other methods 6%.
  • Still, for the first time, cash was not the most preferred payment method when it came to transactions of less than $25, details of the Fed study showed.

Dive Insight:

Trends revealed by the annual Fed report echoed those in prior years, though showed some recovery from impacts caused by the COVID-19 pandemic, when consumers steered clear of contact.

As the average number of monthly payments increased to 46 last year, up from 39 in 2022 (and the 30s since 2019), the average number of cash payments per month remained steady at seven, even as the use of credit cards rose to 15 transactions, from 12 in 2022, and the choice of debit cards rose to 14 from 11, according to the report.

“This suggests consumer demand for cash may have reached the current ‘floor’ given the impact of the pandemic and subsequent economic conditions,” the report said. 

The preference for cash was affected by age, household income and other factors. Specifically, consumers with household incomes of less than $25,000 tapped cash for 32% of their payments while those with incomes over $100,000 used it in about 11% of cases, the report said.

Meanwhile, those who were 55 years of age or older reported using cash 22% of the time, while those between 25 and 54 tapped it 12% of the time and those between 18 and 24 reached for it 14% of the time.

The increase in the use of credit and debit cards flipped last year as consumers reverted to a preference for credit cards over debit cards, a reversal from a higher percentage use of debit cards during the first two years of the pandemic in 2020 and 2021.

While consumers kept using cash for payments, they kept less of it around in 2023 than in 2022, according to the Fed report. They held $369, on average, last year, down from $418 in 2022, even as dollars in circulation increased to $2.27 trillion in October 2023.

The rising percentage of online or remote payments, which increased to 22% last year from 19% in 2022, also necessarily has an impact on the percentage of transactions with cash, given paper dollars can’t be stuffed into a computer screen.

A report from the international consulting firm McKinsey last year showed the worldwide use of cash sliding as digital payments become more available.

That impact from digital alternatives was also evident in the Fed report’s statistics on the use of electronic payments for person-to-person exchanges, with consumers opting for apps for such payments half the time and cash 42% of the time. Nonetheless, the use of apps slipped last year for those payments from 55% in 2022 and the choice of cash increased from 37%.


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