The use of dollars and coins costs the U.S. economy at least $200 billion each year—roughly $1,739 per household—according to a new study from Tufts University. One reason: Americans waste an average of 28 minutes each month just getting to their cash, with part-timers, retirees, and African Americans likely to spend even more time accessing their money. The worst hit, not surprisingly, are low-income consumers, who are dinged with higher fees, along with the lost time.
The U.S. study released this week is the first in a series that will examine the cost of cash worldwide; studies of India, Egypt, and Mexico will follow. Each study looks at the impact on consumers, businesses, and government in economies that show different payment patterns. Bhaskar Chakravorti, who’s spearheading the research as senior associate dean at Tufts’ Fletcher School, said the effort is aimed at quantifying what people intuitively understand: Cash is an inefficient way to store value and conduct transactions. What’s surprising, says Chakravorti, is just how inefficient. “When you factor in the fees, the time, the lost taxes, and other costs, using cash is a significant drain,” he says.
With all the buzz about Bitcoin, PayPal, Google Wallet, and all the other innovations in digital currencies, it’s easy to forget that cash remains remarkably resilient. In part, that’s because the cost of using it is often hidden to the users themselves. Chakravorti, along with co-author Benjamin Mazzotta, says that’s especially true for those who don’t even have a bank account. The unbanked are four times more likely to pay fees to get their own money, yet are also more likely to trust cash and feel comfortable carrying around large amounts.
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