The Federal Deposit Insurance Corporation—an independent agency established by U.S. Congress to maintain stability and public confidence in America’s financial system—issues a biennial survey looking at how America banks. The latest edition offers a compelling assessment of financial inclusion, shining a light on unbanked and underbanked households for whom cash is an essential part of daily life.
The survey estimates 5.4 percent of U.S. households—representing approximately 7.1 million people—are unbanked, meaning no one in the household has a checking or savings account with a bank or credit union. This is the lowest proportion of unbanked households since the survey began in 2009, reflecting socioeconomic improvements over this period, but it still represents a significant percentage of people who depend on cash for everything from rent to groceries and medicine.
The main reason for being unbanked—cited by 29 percent of the survey’s respondents—is not having enough money to meet the minimum balance requirements of a bank account. The second most popular reason—accounting for some 16.1 percent of unbanked households—was a distrust of the banking system.
Even among those with bank accounts, credit cards are not universally used. 72.5 percent of households reported using bank credit (including credit cards, personal loans or lines of credit), with lower-income and less-educated households less likely to use it. Usage was also lower among Black, Hispanic, American Indian and Alaska Native households. Overall, differences by race and ethnicity were ‘large and were present at all income levels.’
According to the 2019 Diary of Consumer Payment Choice, debit cards are the most widely-used form of payment in America today, but cash remains the second-most-used, with consumers paying cash in 26 percent of transactions. For low-value payments (under $10), nearly half are still made in cash. Interestingly, the share of cash use among individuals under 25 is the highest of any age group. The second-highest is among people aged 65 and over.
These studies highlight the importance of cash as part of modern life. Consequently, several states and cities have existing or proposed laws making it obligatory for merchants to accept cash, including Massachusetts, New Jersey, Chicago, New York City, Philadelphia and San Francisco.
The cash-protection law in Massachusetts states: ‘no retail establishment offering goods and services for sale shall discriminate against a cash buyer by requiring the use of credit,’ and the explicit mention of discrimination is key. Everyone should have equal opportunities and access to products and services.
Cash, as the only form of payment without any entrance barriers, is the only way to safeguard financial and social inclusion and freedom of choice. Cash is available to everyone, regardless of social status, financial standing, creditworthiness, age, gender, race, nationality or ability. It does not involve fees, hidden or otherwise, and no registration is needed to obtain, spend or accept it.