CASHLESS SOCIETY: Retailers Turn Noses Up At Currency…
Stroll into the airy Kit and Ace store on Woodward Avenue in Detroit and you're struck by the minimalist style that highlights the brand's comfortable, street-smart clothing line.
But if you wanted to buy a scarf, maybe one that's on sale for about $50, don't bother paying with cash. The store won't take your Benjamins — or Hamiltons, Jacksons or Grants.
It's nothing personal. It's a no-cash policy that has been adopted at other Kit and Ace stores, too.
I don't imagine anyone who favors don't-look-like-you're-trying-too-hard fashion is going to care too much if they can't spend actual cash. But the oddity of a no-cash policy does make you think. How much closer, really, are we to a cashless society? Are we looking at the beginning of a more minimalist approach to money?
"I think we are sort of on the edge of seeing more and more businesses that don't take cash," said Jay Zagorsky, economist and research scientist at Ohio State University.
Zagorsky has been talking about a transition to a cashless society for some time. He points out that some parking lots on university campuses and elsewhere no longer take cash. Many airlines no longer let you pull out cash to buy snacks or drinks because it's too difficult to make change.
Zagorsky sees a time, maybe in a few years, where more retailers do not accept cash, which could make it harder on poor families who do not have bank accounts.
Quirky brandAshiyana Somlai-Maharjan, a rep for Kit and Ace, said the Vancouver, B.C.-based retailer has had a no-cash policy since it opened its doors. She said the policy has not been a detriment to sales.
"Our shops are designed to be a seamless shopping experience. From the strategic layout of our merchandise, to clearly visible hangtags, to no phones on site, and cashless registers," said Somlai-Maharjan.
The retailer does other quirky things: Stores do not list telephone numbers online, and locations often hold "supper club" events for key influencers of the "creative class."
But that no-cash policy? It's still a real outlier.
What about that merchant fee?Many people still do use cash. A 2013 Survey of Consumer Payment Choice indicated a trend away from paper checks. Debit cards were the most popular form of payment, with 31.1% of payments covered by debit cards. Yet 26.3% of payments were covered by cash; while 22.5% are covered by credit cards; and the rest are made by check, money order, prepaid cards, electronic payments and online bill paying.
Retailers and others have plenty of reasons to eliminate cash, Zagorsky said. Clerks or attendants might steal. Or there could be robberies. No one has to count change or make sure a cash drawer balances. Store employees would not have to haul cash to the bank at the end of the day.
The use of credit cards seems harmless, but it comes with a cost — one that retailers tend to pass on to customers. They typically end up raising the prices charged to everyone — including those who pay with cash — to cover the fees that credit card companies charge, Zagorsky said.
Overall, people who have credit cards can benefit, because they often carry rewards cards where they get cash back or airline miles on their purchases. Others are stuck holding the bag.
"It hurts people who pay with cash," Zagorsky said.
'Cash is not going away'Paul Traub, senior business economist for the Detroit Branch of the Federal Reserve Bank of Chicago, said there's no federal statute requiring a private business, a person or an organization to accept currency or coins.
"Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise," Traub said.
A new book, The Curse of Cash by economist Kenneth S. Rogoff, makes the case for encouraging the U.S. government to drastically scale back on $100 bills. Rogoff, a Harvard University professor of public policy, is calling for a "less-cash" society. He'd leave smaller bills in circulation, noting that stores in poor neighborhoods are seeing cash transactions but not typically with $100 bills.
Rogoff maintains that a major issue with paper currency, particularly large bills, is that a good amount is used to facilitate tax evasion and other crimes. Cash, he argues, is king in the underground economy.
He offers this visual: $1 million in $100 bills weighs roughly 22 pounds and can fit smartly into a briefcase.
How much shopping you'd be able to do with that cash could one day depend very much on where you shop.