U.S. edges closer to cashless society

By Barbara Yost
Arizona Republic

Jessica LeTourneur hit the mall the day after Thanksgiving, like thousands of people. She bought a gift for her boyfriend and one to give his mother at Christmas.

"It's easier for me to keep track of my finances if I just use a debit card," the 23-year-old Chandler, Ariz., woman says. "I don't often carry cash. I feel if I keep cash in my wallet I'm more likely to spend it. ... It's like it's burning a hole in my pocket."

LeTourneur is typical of this year's holiday shoppers. It's going to be a plastic Christmas, and we don't mean just the tree.

Debit cards will be the preferred payment method, according to the National Retail Federation. The NRF says 34.7 percent of shoppers were planning to use debit cards as their primary form of payment, up from 30.7 percent last year, and 29.5 percent will hand over credit cards. Shoppers who depend on cash for their purchases will number 25.9 percent.

Checks are becoming as scarce as grumpy elves, totaling only 9.9 percent of predicted purchases this season.

While we've not reached a totally cashless society, we're heading that way, says Tracy Clark, associate director of the Bank One Economic Center, part of the College of Business at Arizona State University.

Plastic is accepted most everywhere, he notes, including fast-food restaurants and even some vending machines. Salvation Army bell-ringers are beginning to accept plastic at their red kettles. Some companies issue pre-loaded debit cards to employees who have no bank account. Some young people will never write a check in their lives, Clark says, and many don't carry a dime.

Like LeTourneur, he says, "for a lot of people what you're seeing is a financial-management tool. They can track where they spent the money."

Ellen Tolley, NRF spokeswoman, says: "I think debit cards are one of the best payment options out there. They're secure. It comes right out of the checking account."

Retailers like plastic because it saves them check-processing fees. And even though credit card companies charge businesses to use their cards, the fees for the most part offset each other, Clark says.

The convenience and security also are big benefits for retailers, says Patrice Duker, spokeswoman for the International Council of Shopping Centers.

"It's an electronic transaction from start to finish," Duker says.

Not everyone thinks plastic is perfect. Harvey A. Smith of Tempe, Ariz., doubts debit cards are completely secure.

"It's convenient for us, but also for crooks," says Smith, professor emeritus of math at ASU and formerly a government official who worked for the Institute for Defense Analyses. He says electronic accounts are vulnerable to computer breakdowns and hacking.

Smith's generation tends to be more fiscally conservative, he says, shaped by the Depression and wary of easy money.

"It can be seductive," he says. "You don't have to do math or count it out."

David Warwick, a California real estate developer, investor and former attorney, dismisses concerns about computer hacking and wants the country to go to an electronic system in which all transactions are traceable.

Ditching cash would save money and reduce crime, he says, eliminating such crimes as muggings, bank heists, cash-register robberies, drug deals and tax evasion.

Privacy advocates worry that such a system would invite abuse, Warwick acknowledges, but he says those concerns are a positive trade-off for security and being able to trace drug traffickers and terrorists through purchases. Hackers would leave their fingerprints on their transactions.

For a while, most of us will still enjoy the jingle of metal in our pockets. We use those small amounts for tips, hot dogs from street vendors and the occasional gumball.

What's needed, Clark says, is a form of "micropayment" — plastic that could cheaply be used to pay a dollar or two.

And the future? Clark says the new wave will include paying for goods with the touch of a button on your cell phone. But he's making no predictions about the date currency will disappear.

"People have figured out that society is more resistant and it takes much longer for society's structures to change," he said.