Fed: Cash demand steady since pandemic

Federal Reserve Financial Services reported yesterday that a new study has revealed consumers made more payments in 2023 than in previous years, continuing the trend of rising payment transactions since 2020. The 2024 Diary of Consumer Payment Choice (Diary), now in its eighth consecutive year, is a survey conducted to understand the evolving role of cash in the U.S. economy. Findings show amid increased payments, cash’s share decreased in favor of credit and debit cards, but overall cash use has remained stable as consumers continued to hold more cash than they did before 2020 as both a store-of-value (up 53 percent) and in their pockets, purses or wallets as a backup payment instrument (up 23 percent).

The findings also show a growing generational divide among those using cash versus electronic payments. Consumers younger than age 55 used cash for just 12 percent of payments in 2023, compared to 22 percent for those age 55 and older. Notably, for the first time in Diary history, cash was not the most-used instrument for smaller-value payments of $25 or less. Prior to the pandemic, consumers aged 18 to 24 used cash for about one in three payments. Starting in 2020, the ratio shifted to about one in seven payments as this population opted instead for credit and debit cards. This change in cash usage among younger demographics may carry significant long-term implications as the U.S. population continues to age.