July 25, 2016

Comparing consumers and their cash habits



A new paper by the Federal Reserve Bank of San Francisco titled “Who Holds Cash?” takes a look at the cash holding and spending habits of average Americans amid ever-increasing payment options.

While the total amount of U.S. currency in circulation totals about $1.4 trillion, only about $70 billion dollars (5 percent) of it can be accounted for in bank vaults, says finance journalist Mark Gimein.

So which Americans are holding cash for a rainy day, which are using it to pay for the majority of their purchases, and which would struggle to find a dollar in the couch cushions? “Working from the data available in the Diary of Consumer Payment Choice, we define someone who holds cash as anyone with more than $1 in their pocket, purse, or wallet,” says Claire Wang, Federal Reserve Cash Product Office policy analyst and the author of “Who Holds Cash?” How do those who hold and spend cash differ demographically from those who don’t, and what is the motivation behind their habits?

“Who Holds Cash?” divides consumers into four groups based on their cash-spending habits:

Cash Lovers

  • Always hold and spend cash
  • Carry the most cash, averaging $85 each day
  • 43 percent between the ages of 35 and 54; just 5 percent under age 25
  • 47 percent cite cash as their preferred method of payment
  • Income levels closely follow the general population

Insight: “Cash lovers might use cash to have better control of their finances.”

Just-in-Case Holders

  • Always hold but rarely or never spend cash
  • Oldest average age of the groups (52), almost half older than 55
  • 100 percent always holds cash, averaging $73 each day
  • Just 16 percent prefer to pay using cash
  • Income levels are higher than the general population

Insight: “A person must have some wealth if he is able to hold cash “just in case” as an emergency fund rather than use it to pay bills.”


  • Neither holds nor uses cash
  • Youngest average age of the groups: 62 percent younger than 35
  • Makes up 9 percent of the general population
  • 39 percent earn less than $25,000 annually

Insight: “The 19 percent of the group that falls between 18 and 24 years old likely has limited access to credit cards, either due to lack of financial maturity or assets. As a result, they would logically depend on debit and cash as their main payment instruments.”

Limited Choice Spenders

  • Doesn’t hold cash, but consistently uses it to make purchases
  • Limited data on this group due to small sample size
  • Makes up just 0.1 percent of the population
  • Youngest average age of the groups, at 30 years old

Insight: “This group likely does not hold cash because they cannot afford to; they need to spend what cash they do have to pay bills.”

Watch as Wang takes to the streets of San Francisco to get commentary from real people who fall into each of these four groups on their cash-carrying habits and the reasons behind them.

Regardless of the motivation for consumers’ preferred method of payment, retailers need to be equipped to accept all of them – from the newest and most innovative to the most traditional. “Our findings show that 89 percent of the population continues to hold cash to some extent (either sometimes or always), and the number of notes held by the public continues to grow, making all the hubbub about cash’s extinction appear unfounded,” says Wang.

Image: iStock