That’s why he tries to use cash for at least some of his purchases. “And this is the exact same reason why casinos use chips instead of cash, because it doesn't feel like it's real anymore.”ĭespite the implications, Zagorsky says the economy is relying less and less on physical currency.
However, if you just slap down a credit card, you're going to pay maybe next month or months later if you decide not to pay off your credit card bill in full,” he says.
“When you have to pull a wad of bills out, there's a moment of pain. If we move toward a cashless society, people will spend more and save less. People tend to spend more when they use digital currencies or credit cards instead of cash because it reduces the pain point, Zagorsky explains. The average American is about $90,000 in the hole, according to the credit bureau Experian. And for some of the poor people in society, you know, losing $8 here, $5 there, that could be the difference between having dinner or not having dinner at night.”Īnother issue is that so many Americans are dealing with mountains of debt. “That means Amazon's holding on to $8 until you decide to buy something else. “Let's say it's a $50 gift card … you can spend up to $50, but what if you're going to purchase something like $42?” he says. For example, Zagorsky says people who are unbanked have to purchase Amazon gift cards with cash in order to buy things on the popular e-commerce site. “Banks love a cashless society because they make money on loans, and the more often you use a credit card, the more often banks get a cut of what you spend.”īut moving toward a cashless society presents equity issues for those who rely on cash to make purchases. “Retailers really enjoy a cashless society because when people pay with cash, they have to count those coins. Still, Zagorsky says retailers, banks, tech companies and the government are all pushing the U.S. The coin crisis has revealed just some of the consequences that can occur when people use less cash and coins, and rely on credit cards, Apple Pay or even Bitcoin. Even with the shutdown, the Mint has produced almost 2.7 billion quarters this year, up from 1.6 billion quarters in 2019, Zagorsky says. Mint has been working overtime since the spring, and it's now on track to mint the most coins it has in 20 years. “Unbanked means they don't have credit cards, they don't have debit cards. “This is a big problem because about of society is unbanked,” he says. When people paid with cash, many businesses didn’t have any change to give customers. The shortage also caused a lot of problems for businesses, Zagorsky says. “So for a whole bunch of reasons, people still wanted to use coins, but very few coins were being recirculated through society.” “There's about $48 billion worth of coins that are circulating through society at any given point in time, and during the pandemic, new coins basically stopped because the shut down,” he says. Banks closed the doors to their lobbies, prohibiting people from depositing coins, and fewer people dumped coins into Coinstar machines at supermarkets. When the surge in coronavirus cases this spring sparked stay-at-home orders, coin manufacturing shut down, Zagorsky says. “Lots of people, lots of different hands, touch cash and touch coins, so because people think it's cleaner, because they've only touched their credit cards, they've only touched their debit cards, lots of people don't want to be using cash during the pandemic,” he says. Many people have stopped using physical currency during the pandemic because of concerns that cash and coins could spread germs and even the coronavirus, he says. The Federal Reserve even formed a Coin Task Force to address the problem.īut it's December, and those signs are still posted despite efforts to get more coins rolling through the economy.įor those of us who need nickels, quarters, dimes and dollars rattling around in our pockets, professor Jay Zagorsky of Boston University’s Questrom School of Business says the shortage underscores the broader implications of the move toward a cashless society. Back in the summer, you probably noticed signs in stores asking you to pay with exact change because of a national coin shortage.
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