“Cash plays a dominant role for small-value transactions, is the leading payment instrument for many types of purchases, and stands as the key alternative when other options are not available,” states the report. “In certain cases, including that of mostly lower-income consumers who lack access to alternative payment options or find them too costly or difficult to obtain, cash is also used for relatively larger-value transactions.”
Payment use by transaction amount
In October 2012, the average American consumer had 59 transactions, including purchases and bill payments, and 23 of these 59 payments involved cash. At 40%, cash makes up the single largest share of consumer transaction activity, followed by debit cards at 25%, and credit cards at 17%.
By value, cash accounts for a relatively small share of total consumer transaction activity at 14%, while electronic methods make up 27% and cheques 19%. These findings suggest that although consumers don’t use electronic methods or cheques very often, when they do, it tends to be for much higher-value transactions. In contrast, cash is used quite often, but primarily for low-value transactions. In fact, the average value of a cash transaction is only $21, compared with $168 for cheques and $44 for debit cards.
“While debit and credit cards are growing strongly, and cash’s share of total consumer transactions may well be declining, the 2012 Diary results suggest that cash still plays a very significant role in the consumer payments landscape,” Concludes the Fed.
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