Hello and happy Sunday! With near-constant talk of rising interest rates, inflation hitting everything from eggs to airfares, and a recession that seems to loom constantly just over the horizon (depending on who you ask), money — for better or worse — has arguably never been a bigger part of modern culture. And, yet, money’s one of those concepts that, the longer you think about it, the more abstract it becomes. So, this Sunday, some 161 years since the first $1 bill was issued, we’re exploring the more tangible question of: how does America actually pay for stuff?

Money moves

‍During a eulogy for his late father in the final season of Succession, Kendall Roy described money as “the corpuscles of life gushing around this nation, this world, filling men and women all around with... desire”. Exactly how those corpuscles work and move, though, is another matter — one that’s changed a lot over the thousands of years that humans have been keeping track of who owns what.

Plastic fantastic

‍Perhaps unsurprisingly, the big headline is that Americans have been turning away from cash and checks in favor of more modern methods in recent years.

According to an annual study from the Federal Reserve that tracks the instruments that US adults use to pay for day-to-day transactions, 40% of payments were made with “paper” (cash, checks, or money orders) in 2015 — a figure that, just 7 years later, had very nearly halved. Paying with cash specifically has seen a similar fall in that time frame too: just 17% of US payments were made with coins and notes in 2022 after they accounted for a third of all payments in 2015.

Conversely, more and more of us are getting comfortable telling cashiers and clerks to put it on our cards. Indeed, the share of plastic payments is up 13% in the last 7 years, with almost all of that coming from people paying with credit cards, sending total credit card debt soaring above the $1trillion mark for the first time ever in 2023. That shift has been music to the ears of Visa and Mastercard execs, whose companies have stacked stunning profits on a few percentage points here and there of almost every transaction.

‍Most Valuable Payments

‍For the above analysis, we looked at the volume of transactions, but when you slice the data by value instead, things look pretty different. On a $-value basis, bank and online payments account for the most actual money changing hands, with some 43% of total dollars spent with the 2 electronic methods in 2022, while cash’s share sinks even further to just 5%.

The cashback comeback?

‍Despite cash’s apparent demise — and the fact that card use, online transactions, and digital wallets like Apple Pay only look set to rise in the coming years — vendors themselves are increasingly encouraging customers to keep things old-fashioned.

Flip the script

‍Last year, some 2.93% of all cash payments came with a discount, as merchants still look to avoid excessive “swipe fees”. Those fees, set by payment networks to charge customers every time they use one of their credit cards, can regularly cost between 2-4% of the transaction — a surcharge that reportedly sets the average US family back more than $1,000 each year. To combat that, vendors seem increasingly happy to say “Hey, if you pay by cash, we can both save a little”, particularly if they’re a small or independent business.

It’s not just anti-swipe store owners, either: there’s a younger generation that’s surprisingly interested in dealing in cash… Gen Z.

Cash stuffers

‍On platforms like TikTok, hashtags such as #cashstuffing have been viewed more than a billion times, as new generations enter the workforce and begin to experiment with different budgeting techniques. For those unfamiliar, “cash stuffing” is simply a rebrand of the time-honored practice of separating notes and coins into different envelopes designated for specific expenses, and the physical approach to fiscal matters is having a real moment with Gen Z specifically.

Psychologists have long understood the mental gulf between spending “digital money” and actual cash — with consumers tending to spend with more reckless abandon when the payment method is less tangible. There’s a reason casinos all use chips: it detaches their customers from the idea that this is real money they’re using and, oftentimes, losing. Cash helps to ground things, and Gen Z seemingly can’t get their hands on enough of the stuff, with 23% adopting it for the majority of purchases and 69% using it more than they did last year, according to a 2023 Credit Karma study.

Cryptocurrency promised an even further level of abstraction from digital dollars, a dream that — so far — hasn’t made it much beyond El Salvador’s experiment to use Bitcoin as legal tender.

Loose change

Ever since the 2nd US Congress passed the Coinage Act of 1792, which established the US Mint and officially recognized the dollar as the American currency of choice, the country’s relationship with money has been a complex beast. Whether you’re in the 62% of Americans who believe that a bigger bank balance leads to more happiness, or count yourself in the 90% who say that finances impact their stress level, the chances are that money’s never far from your mind.

The logical conclusion is that physical cash is likely to disappear over the next 100 years. But, when the youngest, most digitally native, generation is experimenting with old-timey methods of saving money like cash stuffing, it suggests we’re not quite ready to give up the dollar in our pocket just yet.

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