The human cost of cashless transactions

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When it comes to poverty in Rochester, many of the available statistics are grim. One study shows that Rochester has the highest rate of extreme poverty of any comparably sized city in the United States. Extreme poverty is defined as below 50 percent of the poverty level. This same study also points out that Rochester is the fifth-poorest city among the top 75 metro areas nationwide. A 2022 report contends that nearly one-half of all children in Rochester live in poverty and that this number is the second-highest rate in the nation.

Amitrajeet A. Batabyal

Given the unfortunate fact that many in the city we call home are poor, it is worth considering how poverty in Rochester and elsewhere is impacted by the move by increasing numbers of businesses to not accept cash for transactions, but instead to become cashless environments. Businesses, of course, have their reasons for not wanting to accept cash, but assisting poor people with transactions is typically not one of them.

The poor in Rochester and elsewhere in the U.S. are frequently unbanked. This means that they have no access to and/or do not use banking services. Nationwide, nearly 6 million households, or 4.5 percent, were unbanked in 2021. In New York, an even share of households—5.9 percent—were unbanked.

The poor are unbanked for several reasons. Surveys conducted by the Federal Deposit Insurance Corporation ask households without bank accounts why they are unbanked and the answers are instructive. One key reason is that these households cannot afford to maintain the minimum balance requirements. A second important reason is that poor, unbanked households do not trust banks. A third salient reason is the cost of dealing with banks.

Some of us may not worry at all about paying to maintain our bank accounts. But for poor Rochesterians, paying the many fees that banks frequently charge can be a herculean undertaking. For instance, a recent Bankrate survey demonstrates that monthly service fees for banks range from $5 to $15. On top of that, banks routinely earn between $4 and $5 every time a customer withdraws money from an ATM or utilizes a service such as obtaining a cashier’s check. Finally, uncertainty in the form of unexpected bills can lead to bank accounts being overdrawn, resulting in additional overdraft fees.

The collective impact of all these fees is that about one in every five people in the U.S. has little or no connection either to banks or to financial institutions more generally. The implication of this unfortunate state of affairs is that these individuals are effectively excluded from interacting with businesses, restaurants, and even medical professionals that do not accept cash.

The impact of the move by businesses to a cashless environment is felt most by the poor, and frequently unbanked, amongst us. Such individuals must now take actions that are almost never in their financial interest. An example of such an action is to purchase a reloadable prepaid debit card from a merchant such as Walmart. But this action is ultimately counterproductive because one has to pay to pay!

The next time we patronize an establishment in Rochester or elsewhere that is cashless, we should recognize that such establishments, in effect, exclude the least among us who are also very often unbanked. Looking at the problem from the other side and to build a more inclusive society, policymakers with jurisdiction in Rochester should do all they can to ensure that all businesses accept cash.

Amitrajeet A. Batabyal is a Distinguished Professor, the Arthur J. Gosnell professor of economics, and the Interim Head of the Sustainability Department, all at Rochester Institute of Technology, but these views are his own.

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10 thoughts on “The human cost of cashless transactions

  1. You can fight this cashless mission, but keep in mind that the cashless future is on its way and here to stay. You know why? Because it spells complete control of the populous. Control is the cocaine, if you will, of us by the governing few. The EU is well on its way to a cashless goal. Just a matter of time.

    • Thank you for the Best Tin Foil Hat Conspiracy Post of 2024 (so far). I wasn’t aware that when the Bank of America rolled out the first consumer credit card in 1958 they were part of a Deep State conspiracy to “control” the populace. Can you elaborate? The “control” mechanism is unclear. I certainly like to know how voluntarily using a credit card rather than cash makes me a cog in that “control” wheel. Am I more or less “controlled” if I use a card issued by an American bank versus one issued by a foreign bank such as Barclay’s? Or is this one massive planet-wide “control” conspiracy?

      • Oh where to begin. There are nations which are cashless. Scandinavians countries where the trust in financial institutions and banks is high. They are also small in population. Less crime. There is also China where you WILL like it, because the government says so. The two extremes. Then you have the USA, or the Divided States of America. The education system is pathetic. Think about this, grade level mathematics in urban Chicago is zero. Not one student makes/made grade level. Care to check the education level and grades in those card carrying countries? Crime, fraud and the like is rampant in this country. We had our credit cards stolen. Within minutes the culprits had spent nearly $8,000.oo! While we were not responsible for the losses, someone has to cover it. I know for a fact that they (financial institutions) don’t bother following up on the loss. Too much work or effort to bother. Card carrying individuals need to be responsible citizens. We have way to many scammers. And when we apprehend them….they are out the door and back at it the same day! Some, too many, don’t need cash nor a card. They just overwhelm the store and take what they want/need. In california you can walk out with the goods as long as the total is below a set amount. They don’t need cash nor card. $900.00, I believe. A balance of cards and cash might be the course until we get our house in order.

    • Wouldn’t it be easier to just answer the question rather than rambling all over the terrain reciting your list of unrelated opinions? The Chinese, the educational system, credit card theft, etc. make entertaining rants, but as we both know, have nothing to do with your original claim

      Let’s try again. Can you elaborate on that so-called “control” that results from using credit cards? The mechanism is unclear. I for one would certainly like to know how voluntarily using a credit card rather than cash makes me a cog in that “control” wheel.

      • Let me just focus on one….education. We graduate at a rate of 50% in urban Rochester. Forget all the other big cities that are failing our youth. Do you think that a dropout will be able to navigate his/her way through the paperwork, as in accounting, legal, when they can barely read and can’t provide you change for your purchase without the computer telling them how much? You got your piece of the pie, screw them…right! If you find that our failing education system is entertaining, please let me know how that entertains. We’re failing our kids, period. Injecting a cashless society in their world will just isolate them even more. Now I know what you’re thinking, a Republican, a Trump lover. You’d be dead wrong. I’m an independent and registered as such. I don’t follow, I reason and think for myself. Can you….you…elaborate just how the impoverished are going to deal with, to navigate their way in a cashless society? Now I know for a fact that you’re a diehard Democrat. The city and the education system is die-hard Democrat. Got any constructive suggestions on how we can include those who would be left behind in your argument for a cashless society? If you’re a die-hard Democrat or Liberal, I know at some point you’ll decide to stop with the debating. Prove me wrong.
        Semper FI
        Immigrant at age 12
        Medical imaging director

  2. Hallelujah!! Many of us have been singing this song for quite some time — cashless transactions are another way of saying to the poor “don’t shop here”. Wegmans’ and Walmart’s penchant for having one or two actual cashiers coupled with a plethora of self serve electronic checkouts may serve their bottom line, but not the society in which they operate.

  3. Refusing to accept cash is an important intrusion into the US law stating that cash “is legal tender for all transaction both public and private”. This forces we who use these establishments to share important personal data. Data is “the new oil”. Privacy has much more value than most realize.

    I strongly support this wise advice to avoid patronizing business with a cash only policy. Protect yourself and our less wealthy neighbors.

  4. I’m curious about this sentence, ” This same study also points out that Rochester is the fifth-poorest city among the top 75 metro areas nationwide.” Given that Rochester is only the 112th. (or so) largest city in the US, and given that the Rochester MSA has about five times the population of Rochester the city, I don’t understand what’s being compared or the significance of using MSAs.

    • Len, you appear to have difficulty with common sense. You questioned the stats as if you know them inside-out. Let me clue you in on the only stat you need to know, to focus on, to realize, which is the educational failure in urban Rochester. It is the main reason for the generational poverty, the crime, the drugs and all the associated misery. Kids aren’t born dumb nor ignorant. The RCSD has failed them, period. And now you want a cashless society in which they cannot function. Your apparent logic, knowledge and good fortune has you thinking the whole of Rochester, or the nation for that matter, is educationally prepared to deal with a cashless system. Better do some volunteering in the urban schools and get a handle on just how far behind students are, how many drop out and how many survive the K-12 journey. Then you will realize just how much you don’t know about the reality of urban education. I also know that you are a political enthusiast. Better have a talk with your Party and see if they can, at the very least, educate our youth before advocating for a financial system they cannot survive in. SF

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