Alicia Sánchez Gómez reports from New York that despite the global dominance of credit cards and electronic payments, cash remains surprisingly resilient in the United States. This is partly due to the high fees associated with card payments and the significant number of undocumented workers who navigate their finances in a parallel economy.
As of 2023, cash transactions have dropped to 16% of all payments, making it the third most popular payment method after credit and debit cards. The U.S. Federal Reserve’s annual consumer payment choice report highlights that cash is still favored for in-person shopping, particularly among low-income consumers and individuals over 55 years old. Notably, undocumented immigrants also play a significant role in this cash economy, although the report does not specifically mention them.
Merchants often prefer cash payments as credit card processing firms charge merchants up to 4% per transaction, which can be burdensome. In cities like Los Angeles, many businesses adopt a “cash only” policy, especially food vendors who may be reluctant to cover high transaction fees. Manuel Chacón, a Spanish resident of L.A., notes that this trend also extends to fruit and vegetable stalls across the nation.
New York City is similarly dotted with establishments displaying “cash only” signs, particularly in Chinatown and certain areas of Brooklyn. The city’s famous yellow taxis even offer lower fares for cash payments. In the bike repair sector, John Williams, a young American, found that mechanics often give a discount for cash transactions.
The construction industry also frequently uses cash. Rosa Torres shares her experience with a crew of workers who offered to complete her stair project for $3,000 if she paid in cash to avoid municipal permits and taxes. She recalls that in Miami, some restaurants informed customers that paying by card resulted in higher prices due to taxes.
A construction company in Brooklyn employs both legal and undocumented workers, paying the latter in cash-filled envelopes every two weeks, effectively keeping these transactions under the radar. However, economist Curtis Taylor from Duke University warns that the predominance of cash can foster black market activities, including drug trafficking and tax evasion.
Despite the downsides, businesses are allowed to favor cash payments, particularly smaller enterprises that often operate with slim profit margins and cannot absorb high credit card fees. Yet, cash handling poses risks, as it is susceptible to theft and loss, and requires frequent trips to the bank.
In 2005, a group of New York retailers sued Visa and Mastercard over the hefty fees charged for card transactions. This June, a federal judge rejected a $30 billion settlement between the companies and the retailers, extending a legal battle that underscores the ongoing tension between cash and electronic payment methods.
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