The Burden of Cash and the Penny Policy Debate

Abstract

Twenty six percent of all payments and forty-seven percent of payments below $10 in the U.S. are made with cash. Using consumer transaction diary data, this article quantifies the burden from paying with cash by computing lower bounds on the number of currency notes and coins exchanged in each transaction. We then apply the same methodology to address a policy debate on whether to remove the penny coin from circulation in the U.S. By simulating a counterfactual economy, we quantify the effects of eliminating the penny on the burden of paying with cash.