Promoting all businesses to avoid cash transactions will make life more expensive for people who are not banked and who walk the thin line of poverty in the United States.
Philadelphia recently became the first city in the United States to ban most cashless stores.
We review some comments about it from Lisa Servon professor and chair of the the Department of City and Regional Planning at the University of Pennsylvania and published by The Hill.
The professor is the author of “Unbanking of America: How the New Class Middle Survives“, published in 2017 by Houghton Mifflin Harcourt.
Servon says that ban supporters believe that stores without cash discriminate against those who lack financial stability.
In her opinion when stores refuse to accept cash, they send a not-so-subtle signal to certain customers that they do not belong.
“Most people I know can go weeks without visiting an ATM. It’s increasingly easy for many of us to manage our financial lives with credit cards and a smartphone. Yet, cash remains the most frequently used retail payment instrument, used in 32 percent of all transactions in 2015 (down from 40 percent in 2012).”
Cash is legal
Who are the people who continue to use cash, although in decreasing numbers? The majority belongs to 25% of Americans classified as “unbanked” by the Federal Deposit Insurance Corporation (FDIC).
For the specialist in urban poverty studies, community development, economic development, and gender and race issues, these labels imply that all Americans should be banked, “that you are ignorant if you are not. In my 25 years of research in low-income communities, I’ve learned that this is not the case”.
Servon, who has a master’s degree in economic insecurity, holds to have a close-up view of the cash economy, documented during her four months working as a teller at RiteCheck, a check-cashing store in the South Bronx, in one of the poorest zip codes in the country.
“I suspected that the explanation for why people didn’t use banks was more nuanced than a lack of financial literacy. The majority of people who patronize these stores are low-income, and most of the low-income people know where every penny goes”.
The reason why some people can operate without cash is because they have enough money coming on a regularly to qualify for free checking. Their bank account balances never drop below the monthly minimum, and they can keep a “buffer” in their accounts so that, in case of error, an overdraft is avoided.
However, people with temporary jobs, employees in marginal businesses who get irregular payments, cannot have a bank account and they are willing to pay for that access, 1.95 percent of the face value of the check, because they had no other option.
Translated by: Jose Espinoza