Cash and Carry

A comeback for greenbacks

Bucks, folding money, bread--whatever you call it, cash is making a comeback. Like a reformed smoker finishing his last pack; American consumers are putting away the plastic. Many stores now provide cash discounts, and the Government is worried about shortages of coins and currency.

The "back to basics" movement in money was spurred by Jimmy Carter's admonition to the public in March to cut down on credit purchases, and the Federal Reserve's subsequent credit restrictions. Though the Administration has now changed its mind, consumers had begun their own austerity programs. The share of people's disposable income going to installment credit slipped from last summer's 20.3% to 18.5% during the first three months of this year. For April, consumer installment debt fell by nearly $2 billion, the first time in almost five years Americans have paid off more than they have borrowed.

Alarmed by the decline in charge purchases, some retailers, such as Sears, are urging their credit customers to come back and spend. But many others are offering discounts for purchases made with old-fashioned folding money. At Pure Gold, a jewelry boutique in Atlanta, the response to a 10% cash discount has been "terrific," according to a saleswoman. Last week the House of Representatives gave further encouragement to the trend by voting to lift cash-discount restrictions. At present some states limit to 5% the discounts offered as incentives for payment in cash.

The back-to-currency trend has spawned a boom in cards that give members discounts on cash purchases. One of the most successful is Savings Plus, which originated in Missouri and now claims more than 500,000 members nationwide. Under the name SaveSystem, merchants accepting the card in Washington, D.C., give discounts up to 15%.

With all the money running through the public's fingers, the Federal Government is beginning to face a legal tender shortage. With the price of copper going up, people are hoarding pennies. A paucity of $50 and $100 bills has been reported in California, where they are widely used in "pyramid clubs" (the modern variation of the old chain letter), which usually require players to contribute $500 or $1,000 in cash. The Saudis also like $100 bills. In May, Saudi Arabian banks took delivery on $250 million in $100s.

One solution under study by the Treasury Department: printing bills on a more durable plastic-like material that would keep them in circulation longer. If that happens, the U.S. might well become an all-plastic society.

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