Money, both in paper and coin form, has been used for thousands of years. But since the invention of credit and debit cards, online banking and electronic monetary transfers, are governments around the world trying to end the use of paper and coin currency by its citizens? Is there truly a war brewing for cash transactions vs. electronic? The short answer is yes!
However, a brief step back in time is in order first. Ever wonder why there are not larger paper bills in the United States than the $100 bill? At one time, there actually were. Prior to 1969, there existed $500, $1,000, $5,000, and $10,000 notes, in addition to the $100 bill. However, in 1969, the U.S. Treasury announced that it would stop issuing all paper currency higher than the $100 bill. Though should you run across one of these unusual bills, they are still legal tender, though probably worth more to a collector than their actual face value.
The reason for ending the printing of large denominated bills? Their main purpose was for bank transfer payments. However, with the arrival of more secure transfer technologies (electronic, checks, paper notes, etc.) they were no longer needed for that purpose. It was also noted by the Treasury that criminals and those evading taxes often used cash, especially the easier to hold and transfer higher denomination bills.
Today, according to the Federal Reserve Bank of San Francisco;
In October 2012, the average American consumer had 59 transactions, including purchases and bill payments, and 23 of these 59 payments involved cash. The figure below shows that, at 40 percent, cash makes up the single largest share of consumer transaction activity, followed by debit cards at 25 percent, and credit cards at 17 percent. Electronic methods (online banking bill pay and bank account number payments) account for 7 percent, while checks make up 7 percent. All other payments represent less than 5 percent of monthly transaction activity, with text and mobile payments barely registering at less than one half of one percent.
Are governments, both in the U.S. and the world, still attempting to decrease the use of cash on day-to-day transactions? A recent editorial from the Wall Street Journal tells it best;
Mario Draghi fired the latest salvo on Monday when he said the European Central Bank would like to ban €500 notes. A day later Harvard economist and Democratic Party favorite Larry Summers declared that it’s time to kill the $100 bill…
Limits on cash transactions have spread in Europe since the 2008 financial panic, ostensibly to crack down on crime and tax avoidance. Italy has made it illegal to pay cash for anything worth more than €1,000 ($1,116), while France cut its limit to €1,000 from €3,000 last year. British merchants accepting more than €15,000 in cash per transaction must first register with the tax authorities. Fines for violators can run into the thousands of euros. Germany’s Deputy Finance Minister Michael Meister recently proposed a €5,000 cap on cash transactions. Deutsche Bank CEO John Cryan predicted last month that cash won’t survive another decade.
And history continues to repeat itself. The reasons for this are clear, governments continue to see the use of cash to evade taxes and for criminal (and terrorism) use. Cash is not traceable, electronic transfers are.
So continue to use cash, stuff it under your mattress and stockpile it in your lockbox, as it seems the age of cash is soon coming to an end.