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Cash remains dominant

Angela Shah (The Dallas Morning News) -- When it comes to cash, Americans still can't leave home without it.

Despite the advent of credit cards, debit cards, wire transfers and Internet banking, the old way to pay remains the best for most Americans.

"We have definitely seen an increase of cash usage," said Susan Icard, senior vice president in charge of Texas cash services at J.P. Morgan/Chase in Dallas. "We're always hearing about a cashless, checkless society, but I still don't see it in the near future."

In restaurants, supermarkets and drug stores, cash reigns. In the age of electronic commerce, paper transactions not only still dominate but continue to grow, according the Federal Reserve Bank's Houston office. Cash and paper checks remain the workhorses for Americans to make daily purchases and pay bills, the report states.

"People like cash because it's anonymous, convenient and easy," said John Hall, a spokesman for the American Bankers Association in Washington, D.C.

Beyond the sheer durability of banknotes, bankers say the once-booming economy -- especially in the Southwest United States -- fueled cash use by literally putting more money into consumers' hands.

"Households have more disposable income, and they're spending it," noted Ms. Icard.

Consumers have eagerly embraced newer methods of payment. Growth in the value of transactions using debit and credit cards reached 16.3 percent in 1998, the latest year for which figures are available. During the same period, cash transactions grew by TK percent, and checks, 2.6 percent.

Together, debit and credit cards comprise 25 percent of all point-of-sale payments, compared with 36 percent for checks and 38 percent for cash in 1999, according to NFO Worldwide Inc., a research and marketing enterprise in Tampa, Fla.

Certainly, tracking monetary exchanges is an inexact science. Bank transactions are inherently private, the Fed cautioned, and no one records the number or value of U.S. cash transactions that move from one pocket to another.

Scholars trace the origin of money back to the Chinese in 100 A.D., and 2,000 years later, it still gets the job done.

The automatic teller machine -- an electronic piggy bank that sits on nearly every American street corner -- promotes the use of legal tender. The number of ATMs nationwide has nearly tripled in the last 10 years to 273,000 machines in 2000, according to the American Bankers Association. The number of ATM transactions and the annual value of withdrawals have risen at similar rates, according to the bankers' group.

Today, cash is available nearly everywhere, anytime.

"It's real common to see people at all times using an ATM machine to get cash," said Norm Bagwell, president of Bank One Dallas. "They go to the ATM three times a week."

Immigration in the Southwest -- and Texas in particular -- also contributes to the popularity of hard currency. Many immigrants prefer to operate in an underground economy that revolves around cash because they hail from countries where financial institutions are either unstable or beyond the touch of average people.

"Typically the farther south [in Texas] you get, there seems to be more of a cash-based economy," said Gervase Hutzler, senior vice president at San Antonio-based Frost Bank. "Down in the Valley, cash flows rather freely in our locations down there."

U.S. currency is often used in other countries as a hedge against inflation or devaluation. "In Mexico, it can be an acceptable form of trade, and no conversion is needed," Mr. Bagwell said.

Notes and coins held by the public grew from $270.3 billion in 1991 to $464.1 billion in 1998, according to the Fed.

To ease the flow of bills, the Fed has built a new vault and cash-processing facility in Birmingham, Ala., and two other such centers are under construction in Atlanta and Phoenix. A fourth facility is planned for Houston.

"The cashless, all-electronic society remains a distant vision," according to the Fed report.

Hypotheses of an impending cashless society have found voice before.

"When credit cards were introduced more than 40 years ago, there was a thought we would have a checkless society within five to 10 years," said Mr. Hall of the American Bankers Association. "That hasn't happened because people like options."

Aaron Rausche, a 23-year-old in technical support at the Haynes & Boone law firm, seamlessly moves from debit card to cash to credit card, depending on what the merchant takes.

Many of the restaurants near his downtown office don't take debit cards, so Mr. Rausche thought nothing of stopping by a nearby ATM.

"I can't imagine not using an ATM card," he said. "I've had an ATM card since I got my [driver's] license. I've always had one."

(c) 2001 The Dallas Morning News

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