The number of U.S. adults who say they use mostly cash for purchases fell sharply over the past five years as online shopping grew and new payment options took hold, making it easier to go cashless.

A Gallup survey of 1,013 U.S. adults in July showed 13% of survey respondents say they make all or most of their purchases with cash, compared to 28% of respondents five years ago. Sixty percent of respondents said they use little to no cash when transacting, versus 32% five years ago.

“Compared to five years ago, a lot of things have changed and the pandemic has a lot to do with how people buy things,” said Jeffrey Jones, senior editor at Gallup. Results of the Gallup poll were issued Aug. 25. It was only the second time the survey firm polled people on cash use, with the first instance in 2016. 

The data aligns with trends seen in a recent Federal Reserve payment study, which also showed a decline in cash transactions since 2016. The Federal Reserve Payments Study, released last December, logged an increase in payments processed over general-purpose credit and debit card networks. Those networks include non-prepaid and prepaid debit-card networks, automated clearinghouse transfer system and check clearing. 

The Fed said debit cards, ACH and checks formed the core of noncash payments, but the COVID-19 pandemic changed some behaviors and gave rise to new payment technologies as people shopped more from home or work.

Some of those new payment methods included in-person contactless card payments, digital wallets and peer-to-peer payment services such as Zelle, PayPal and Venmo. Buy now-pay later payment services have also increased how easy it is for people to pay for products online, given shoppers can pay for goods in interest-free installments.

Echoing the Fed’s study, the Gallup survey results said the rise of no-cash transactions is the result of increased online shopping during the pandemic and the rise of digital wallets, but also a larger number of merchants accepting electronic payment, an increase in self-checkout registers in grocery and larger retail stores, and mobile pay options that allow people to pay for purchases using their smartphones.

Demographic breakdowns

Middle and upper-income Americans, defined as people with annual household incomes between $40,000 and $99,999, are more likely to use cash sparingly, if at all, with the survey showing 73% of this group using mostly non-cash options for purchases. For people who make $100,000 or more, only 5% say they use cash for all or most of their purchases.

Lower-income respondents, those making $40,000 or less, are more likely to still use mostly cash, with 22% of these Americans sticking to physical money.

Age also affects who is likely to use cash versus electronic payments, as younger respondents opt for non-cash options. Only 11% of 18-to-29-year-olds say they use mostly cash, versus 37% of people in this group responding the same way five years ago. 

While it may not be a surprise that a younger demographic chose electronic payments over cash compared to an older generation, the rate of decline in the current survey versus five years ago stood out to Jones. 

The rate of change in cash use for younger groups was much more significant, a 26 percentage-point plunge, whereas for other age groups, the rate of change versus five years ago was about the same, a 15 percentage-point drop, Gallup said.

“That could reflect that some of those people weren't even adults five years ago (for the first survey),” Jones said.

A cashless society

One unchanged statistic in the survey was the belief by 64% of survey respondents that it’s likely or very likely the U.S. will become a cashless society sometime during the respondents’ lifetime. Five years ago, that figure was 62%. 

The speed at which the pandemic advanced non-cash payments could make a cashless society a reality sooner than later, and technology will play a part. Jones noted the Fed study showed mobile app payments constituted 3% of all non-cash transactions.

That figure is small, but it could grow if people become comfortable giving their payment information to the digital payment systems offered by tech giants Apple and Google, among others. Considering most people carry their phones with them constantly, being able to tap it at a store’s register, especially at stores that have no cashiers, is convenient, he said.

“There might be even more technology coming out that we're not even aware of yet that could facilitate a shift away from cash and other, more traditional forms of payment to these easy, electronic smartphone-based ways of paying for things,” he said.