Cash Use Rises as Households Struggle to Cope With High Inflation
Cash Payments Make a Comeback as Inflation Soars
As inflation rates continue to rise, households are turning to cash payments to manage their daily expenses. According to a recent survey by Credit Karma and The Harris Poll, 53% of adults in the United States and 46% in the United Kingdom are more likely to use cash than they were a year ago. This marks a reversal of the trend towards digital payments that has been ongoing for decades.
The survey also found that younger generations, such as Millennials and Gen Z, are leading the surge in cash use. Many are turning to social media platforms like TikTok and Facebook to learn about budgeting techniques like “cash-stuffing” and envelope budgeting.
Benefits of Cash Payments
- Using physical money makes people more conscious of their spending habits, leading to less impulsive purchases.
- Cash payments are more widely accepted than digital payments, especially in small businesses and rural areas.
- Cash payments provide a sense of security and privacy, as they cannot be hacked or traced like digital payments.
Despite the growing popularity of digital payments, many consumers are finding that they spend more than intended when using them. Over two-thirds of survey respondents admitted that digital payment methods made them spend more than they had planned.
The Future of Cash Payments
The rise in cash use may not be temporary, as studies by the Federal Reserve and the Bank of England suggest. The BOE noted in October that it had seen a “sustained, if partial, recovery in cash use” post-pandemic and that banknotes in circulation have risen close to a historic high.
However, central banks worldwide are pushing ahead with plans to introduce digital versions of their currencies, which has sparked concerns about privacy and government surveillance. The continuous rise in cash use may depend on how central banks manage to tame stubbornly high inflation rates in the coming months.
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