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07/17/2007

Electronic Money Triumphs Over Cash & Checks

The long-predicted �cashless society� has quietly arrived...currency, coins and checks are receding as ways of doing everyday business. Some say that we�ve become a plastic nation.

Although the government will print about 9.1 billion individual bills in fiscal 2007, 95% is for replacing worn currency...not to expand the supply.

Presently, plastic cards can be used almost anywhere as the number of card-swiping terminals nearly tripled to 6.8 million between 1999 and 2005. At the same time, habits and mind-sets have changed. Consider that in 1990 most Americans regarded paying for groceries by credit card as unnatural. Now cards cover about 65% of food sales.

Plus there�s electronic banking (83% of Social Security beneficiaries receive their monthly payments by automatic deposit), internet buying, prepaid cards, and automatic identity tags for toll booths

The Federal Reserve estimates that from a peak of almost 50 billion in 1995, the number of checks written in the U.S. fell to 36.6 billion in 2003, while the number of electronic payments rose from 15 billion to 44 billion. In 1970, the economy�s relative need for cash was almost twice as high as in 2006 which supported a $13 trillion economy with only $400 billion in currency.

The triumph of electronic money reflects its origins in technology. In many ways it�s cheaper than cash or checks. The Fed says that processing an electronic payment costs a fifth as much as a check. It�s also more convenient as people don�t need to run so often to the bank or ATMs for cash.

A dramatic change has taken place over time that many do not even notice. Experts say we have crossed a cultural as well as an economic threshold when plastic and money became synonyms.


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