While the cashless movement gained momentum during the early stages of the COVID-19 pandemic, advocates of the right to use cash are taking their fight to Congress. In July, Rep. Donald M. Payne Jr., D-NJ, introduced a bill to prohibit businesses from rejecting cash payments for in-store transactions.

If successful, the Payment Choice Act of 2021 would set a law at the national level similar to those enacted in the past two years in New Jersey, Washington, D.C., Philadelphia, San Francisco, Colorado, Rhode Island and New York City. Massachusetts has had a law on the books since 1978.

Cash is the only option that 55 million Americans currently have “to pay for food, housing and other essentials” because they have no bank accounts or credit cards, Payne said when he introduced the proposed legislation. “There are too many stores and businesses that want to reject American cash in favor of digital payments.”

In 2020, cash accounted for about a fifth of all U.S. purchases (19%) according to the Federal Reserve’s Diary of Consumer Payment Choice. That number declined seven percentage points from the previous year, which the Diary attributes to the pandemic. “The decline in total payments in 2020 was mostly due to a decrease in the number of small-value payments under $25.”

Long-term Ill Effects of a Cashless Society

This trend in cashless businesses will cause long-term harm to consumers and could lock millions of unbanked or underbanked Americans out of vast swaths of the economy. According to the most recent data published by the Federal Reserve, 18% – nearly one in five – of U.S. adults in 2020 were either unbanked (entirely without any bank account) or underbanked. The latter are people who have a bank account but also use “alternative financial services” such as payday lenders, sellers of money orders, or check-cashing services. 

It is these minority, low-income, undocumented or rural Americans, with little or no access to noncash forms of payment such as credit and debit cards and smartphone apps, who necessarily must rely on cash, and who can least afford the interchange fees and other costs that ordinarily must be paid on noncash purchases.

Refusing cash subjects retailers, and their customers, to disruptions that may be caused by power failures, systems outages, and other electronic and mechanical malfunctions that often result from extreme weather events and other natural disasters. Moreover, such retailers effectively are closing their doors on the millions of unbanked Americans without bank accounts. 

Reasons to Protect Cash

In addition to squeezing out the unbanked and underbanked, Payne said, cashless payments create privacy issues that don’t exist with cash. “I have serious concerns about the safety and privacy of the data that companies are collecting from consumers during routine purchases,” he said.

Cyber risks make consumers especially nervous, and that is reflected in a recent poll by The Associated Press-NORC Center for Public Affairs Research and MeriTalk. For instance, 64% believe their social media activity is not very – or at all – secure. “About as many have the same security doubts about online information revealing their physical location,” the AP reported.

But there are other reasons for wanting to protect cash use. On its website, the Consumer Choice in Payment Coalition also lists the following:

• Everyone can use cash regardless of income or status
• Cash provides more privacy than other forms of payment
• Cash is anonymous
• It helps consumers budget and teach children financial responsibility

“Cashless enterprises lock out millions of unbanked Americans, of all ages, and open consumers to data privacy breaches while dramatically reducing payment options,” the coalition says on its website. “Citizens who value the anonymity of paying with cash, and who do not want to be burdened by the high rates of interest on credit cards, should have the option to pay with cash.”

The coalition holds participation from a variety of businesses and non-profit organizations, including APG Cash Drawer, ARCA, Consumer Action, Crane Currency, the International Currency Association (ICA), BRINKS, Diebold Nixdorf, NAACP, and more.

The fate of the Payment Choice Act of 2021 (H.R. 4395) is unclear but is gaining momentum. Similar bills have been introduced in past years. However, support for the measure is building, as indicated by a letter in August from Americans for Financial Reform to members of Congress. “All consumers should have the freedom to choose to pay with cash at grocery stores, restaurants, and businesses,” the letter states.

To learn more about the movement to protect cash payments, click here.