A deathbed economy has breathed new life into the use of cash, reports a recent survey.
In 2009, U.S. consumers put away their credit and debit cards and reached for cash, according a poll of consumers released today by the Federal Reserve Bank of Boston.
Between 2008 and 2009, which included a severe recession, consumers shifted toward making more payments with cash and close cash substitutes, according to the report, "2009 Survey of Consumer Payment Choice."
"Cash payments increased by 26.9 percent; cash holdings and total monthly withdrawals of the average consumer also increased similarly," according to the study, which was conducted by the bank's Consumer Payments Research Center. The center surveyed 2,169 individuals about their spending habits. "At the same time, consumers reduced their payments by credit card by 21.9 percent, check by 10 percent and even by debit card by 10 percent."
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The stalled economy served as the catalyst, encouraging consumers to shift away from credit cards toward cash for both supply and demand reasons. "Cash helps some consumers cut costs and improve budgeting," the report said.
The survey's authors noted, however, that government regulations related to credit and debit cards and bank pricing of payment -card services also may have contributed to the decline in the use of cards. Another factor, which may have played into the mix, was consumers' concerns about the security of electronic payments.
The report questioned whether the move toward cash is temporary or permanent, but the study seemed to answer its own question.
"However, the fact that consumers continue to tend to rate cash highest in virtually every payment characteristic (acceptance, convenience, cost and security) suggests that consumer demand for cash is unlikely to disappear any time soon," the report stated.
