Tags: MasterCard | cash | fees | ATM

Study: Americans Paying Billions for Using Cash

By    |   Tuesday, 15 October 2013 09:21 AM

Americans are spending billions each year for the almighty dollar, according to a new study titled "The Cost of Cash in the United States."

There are "nickel and dime costs" all throughout the lifecycle of cash, Ben Mazzotta, a postdoctoral research fellow for inclusive growth at Tufts University and co-author of the study, writes in an article for MasterCard article.

Consumers spend on average approximately 28 minutes per month traveling to the point where they access cash. If the average time cost of 28 minutes monthly were distributed across the American working population, it would equal nearly 5.6 hours per year per individual spent fetching cash, worth a collective $31 billion at the mean wage, the study finds.

Editor’s Note:
Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify)

According to the study, Americans are now spending approximately $8 billion per year just in out-of-network ATM charges. In addition, they pay another $5 billion for account fees, MarketWatch reports.

Not having a bank account does not appear to be an answer to eliminating the costs. Mazzotta says research reveals the "regressive impact" of cash-related costs.

The unbanked are four times as likely to pay fees to get to their cash and they pay $4 more per month for that access, he notes.

Beyond the individual level, there are the costs that the government pays, Mazzotta explains. In addition to the costs of creating and distributing money, there is the tax gap, which are revenues from cash transactions that are never remitted to Uncle Sam.

The tax gap is so large that it overshadows the discretionary spending of most departments in the federal government's executive branch. And once you take into consideration the various stakeholders, consumers, businesses and the government, the cost of cash is at least $200 billion, says Mazzotta.

And these costs are for a fairly limited use of cash — 80 percent of all consumer spending is cashless, says a separate report from MasterCard.

Electronic payment methods are nearly ubiquitous in countries, such as Belgium, France and Canada, and the United States is approaching a "tipping point" to becoming cashless too, the report says.

Peer Stein, director of access to finance advisory services at the International Finance Corp. tells MasterCard researchers that the journey from cash to electronic payments is not expected to occur overnight but the trend has gathered significant momentum in recent years.

"What seems to be overlooked in the policy dialogue is that cash takes time to access, is riskier to carry, and costs a country up to 1.5 percent of its GDP," he explains.

As the costs of cash are rising, incentives to use credit cards are growing, says MarketWatch, which notes that Cardhub found travel and cashback awards have improved since last year.

For those who pay off the balance in full, a rewards card might be the way to go, Kathleen Campbell, the founder of Campbell Financial Partners, tells MarketWatch.

But for individuals who are likely to carry a balance, it's still better to use cash while finding ways to reduce the costs experts say.

Editor’s Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify)

Related Stories:

Bankrate: Checking Fees Reach Record Levels

GAO Report: ATM Fees Have Soared

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Americans are spending billions each year for the almighty dollar, according to a new study titled "The Cost of Cash in the United States."
MasterCard,cash,fees,ATM
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2013-21-15
Tuesday, 15 October 2013 09:21 AM
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