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Why cashless retailers put low-income people at even more of a disadvantage

Some restaurants, clothing stores, and hair salons are refusing to take cash, and the trend is only likely to grow.

Retailers are going cashless to cut down on transaction times and reduce the risk of being robbed.
As more retailers go cashless, Walmart is allowing customers who don’t carry plastic to buy prepaid cards to pay for purchases.
Robyn BeckAFP/Getty Images

Cold, hard cash: One day you might have to tell your grandchildren what this phrase means, because cash is quickly fading into irrelevance. Today, only about a quarter of consumers make all their purchases with cash, and a growing number of retailers no longer accept it.

The cashless trend reportedly kicked off with restaurants, but it has now spread to clothing retailers like Everlane, Reformation, and Bonobos. Even airlines like United and Delta have banned cash at ticket counters and for in-flight purchases. Beauty salons like DryBar and fitness studios like the Bar Method don’t want your paper either. What gives?

One reason is that cash actually costs retailers money. Banks charge companies fees to process coins and bills, and if a company does enough business in cash that it needs armored truck services, that, too, costs money. Not only does going cashless save businesses money, it also cuts down on transaction times and reduces the likelihood that they will be robbed.

But while the cashless trend benefits businesses, there are also downsides. Merchants are charged small fees for credit card transactions, and they tend to pass along these charges, often about 2 percent of a purchase, to customers. That’s not the only disadvantage the cashless trend poses to shoppers: About 7 percent of US households are unaffiliated with a bank, so a cashless movement could lead our society to become even more class-stratified than it already is. Those who rely on cash tend to be low-income, immigrants, or elderly. For these already marginalized populations, a cashless America threatens to push them out of the economic sector.

Clothing retailers like Bonobos, Everlane, and Reformation are all cashless.
Bonobos is a cashless retail chain, along with stores like Everlane and Reformation.
Spencer Platt/Getty Images

Why millions of US households have no bank affiliation

Establishments like blowout bars and fitness studios already pose barriers to low-income consumers, but that doesn’t mean these individuals never set foot in these places or take flights, dine out, or buy clothes. In fact, Everlane sells T-shirts for as little as $15 and select dresses for under $30, putting its wares in reach of some low-income customers. Making everyday retail spaces cashless will make the shopping experience even more fraught for the economically disadvantaged or immigrants.

Take Los Angeles, for example: In the LA area, more residents — 8.6 percent — are unbanked compared to the national average of 7 percent. That’s likely because the city is home to a large immigrant population.

“They pay for utilities, medical services and their children’s education needs all through cash,” Melany De La Cruz-Viesca, the assistant director of the UCLA Asian American Studies Center, told Southern California Public Radio in April.

Financial institutions tend to require minimum balances, charge monthly fees, or impose penalties for overdrafts. These features of banking make it off-limits to the socioeconomically disadvantaged. And some immigrants or elderly people simply may not trust banks.

“If we keep moving in this direction of a cashless system,” De La Cruz-Viesca said, “what I see happening is a lot of the low-income immigrant groups in LA will fall out of the economy.”

The same can be said about low-income people nationally.

Advocating for low-income people in a cashless society

Some retailers, like Walmart, are addressing the issue by selling prepaid cards for customers without bank accounts. And United Airlines has kiosks at airports that also allow cash-only customers to buy cards worth different values.

While prepaid cards help cash-only customers, they’re not a panacea in an increasingly cashless society. Some lawmakers want regulations in place to prevent consumers who don’t use credit or debit cards from being left behind.

Rivka Gewirtz Little, the research director for IDC Financial Insights, told USA Today that she predicts the number of cashless retailers will grow significantly each year over the next decade. Since lawmakers also predict this could happen, they have introduced legislation this year banning cashless merchants in Philadelphia and Washington, DC, this year. The Philadelphia City Council is trying to prohibit retailers from going plastic-only. Chicago tried to ban cashless merchants last year but failed. But Massachusetts has had an anti-cashless policy written into state law since 1978.

Going cashless puts the underprivileged, be they undocumented immigrants, low-income, or the elderly, at even more of a disadvantage. But in a world that’s given rise to cryptocurrency, digital currency, and online-only shopping events like Prime Day and Cyber Monday, a cashless society now seems almost destined. A future without cash, though, shouldn’t mean that protections aren’t put into place for the marginalized.

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