Susan Tompor

Detroit Free Press Personal Finance Columnist

U.S. data shows that credit card use is very positively correlated with incomes.

Higher-income consumers frequently using credit cards benefit from cash back or other rewards.

People pay the bulk of their bills and buy goods each month with debit cards and cash.

Stroll into the airy Kit and Ace store on Woodward Avenue and Clifford Street in Detroit and you're struck by the minimalist style that highlights the brand's comfortable, street-smart clothing line.

But if you wanted to buy a soft scarf, maybe one that's on sale for about $50 or another full price at $148, don't bother paying with cash. The store won't take your Benjamins — or Hamiltons, Jacksons and Grants.

It's nothing personal. Nothing against Detroit's fledgling retail avenue, which includes a new Nike store that does take cash. It's a no-cash policy that has been adopted at other Kit and Ace stores, too.

I don't imagine anyone who favors don't-look-like-you're-trying-too-hard fashion is going to care too much if they can't spend actual cash.

Most people might be surprised, I'd guess, like I was when I stumbled onto the policy while browsing with a friend. But I'd also expect many shoppers, like my friend, to hardly blink at pulling out plastic for clothing that's hardly a necessity.

The oddity of the no-cash policy does make you think. How much closer, really, are we to a cashless society? Are we looking at the beginning of a more minimalist approach to money?

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"I think we are sort of on the edge of seeing more and more businesses that don't take cash," said Jay Zagorsky, economist and research scientist at Ohio State University.

Zagorsky, who runs a website called The Eclectic Economist, has been talking about a transition to a cashless society for some time. He readily points out that some parking lots on university campuses and elsewhere no longer take cash to pay for parking.

Many airlines no longer let you pull out cash while on board to buy snacks or alcoholic beverage; it's too difficult to make change. Often, you could buy a voucher or coupon book before you get on the plane, if you don't have a credit card or debit card.

Zagorsky sees a time, maybe in a few years, where more retailers and others do not accept cash, which could make it harder on poor families who do not have bank accounts.

Quirky brand

Ashiyana Somlai-Maharjan, who is on the Kit and Ace public relations staff, said the Vancouver, B.C.-based retailer has had a no cash policy since it opened its doors.

"Our shops are designed to be a seamless shopping experience. From the strategic layout of our merchandise, to clearly visible hangtags, to no phones on site, and cashless registers," said Somlai-Maharjan.

She said the cashless policy has not been a detriment to overall sales.

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The Kit and Ace brand was founded two years ago by Lululemon’s former CEO Chip Wilson’s wife, Shannon Wilson, and her son, J.J. The retailer does other quirky things: Stores do not list telephone numbers online, and locations often hold "supper club" events for key influencers of the "creative class."

But that no-cash policy? It's still a real outlier. We're far more familiar with some small stores that put a dollar limit on when you can pull out a charge card, say for purchases of $5 or more.

And honestly, how many people are carrying around $198 in cash for a comforter wrap sweater?

What about that merchant fee?

Many people still do use cash. A 2013 Survey of Consumer Payment Choice — conducted by the Federal Reserve Bank of Boston — indicated a continued trend away from paper checks. Debit cards were the most popular form of payment with 31.1% of monthly payments covered by debit cards. Yet 26.3% of monthly payments were covered by cash; while 22.5% are covered by credit cards.

Other payments are made by check, money order, prepaid cards, electronic payments and online bill paying.

Retailers and others have plenty of reasons for eliminating cash, Zagorsky said. Clerks or attendants might steal some cash on the side. Or there could be robberies at the store. No one has to count change or make sure a cash drawer balances.

Store employees, unlike Cher's character in the 1987 romantic comedy "Moonstruck," would not have to worry about forgetting to deposit an envelope of cash at the bank at the end of the day.

For the most part, retailers are not cutting into their profits or pushing up their own costs by accepting credit cards and paying the extra fee.

Instead, research indicates that stores typically end up raising the prices charged to everyone — including those who pay with cash — to cover the increase in merchant fees that credit card companies charge, Zagorsky said. The bank fee that U.S. merchants pay for accepting credit cards is proportional to the dollar value of the sale.

Overall, people who have credit cards can still benefit because they often carry rewards cards where they get cash back or airline miles on their purchases.

"It hurts people who pay with cash," Zagorsky said.

What happens when the dog is hungry for cash

'Cash is not going away'

Paul Traub, senior business economist for the Detroit Branch of the Federal Reserve Bank of Chicago, said there's no federal statute requiring a private business, a person, or an organization to accept currency or coins as payment for goods or services.

"Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise," Traub said.

But Traub said, as business activity has picked up since the end of the financial crisis, the Fed's cash intake has been quite good.

"Cash is not going away," Traub said.

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A new book, though, called "The Curse of Cash" by economist Kenneth S. Rogoff, makes the case for encouraging the U.S. government to drastically scale back on $100 bills in circulation.

The book, published by Princeton University Press, offers a thought-provoking theory for phasing out paper money, not eliminating it.

Rogoff, a Harvard University professor of public policy, is calling for a "less-cash" society.

He'd leave smaller bills in circulation, noting that stores in poor neighborhoods are seeing cash transactions but not typically with larger bills.

Perhaps surprising to many of us who don’t carry much cash, almost 80% the U.S. currency supply circulating outside financial institutions is in $100 bills.

Who has all those Benjamins? Maybe the crooks?

Rogoff, a former economist at the International Monetary Fund, maintains that a major issue with paper currency, particularly large bills, is that a good amount of cash is used to facilitate tax evasion and other criminal activities. Cash, he argues, is king in the underground economy.

He offers this clever visual: 1 million dollars in $100 bills weighs roughly 22 pounds and can fit smartly into a good-sized briefcase or large shopping bag.

How much shopping, of course, that you'd be able to do with that cash could one day depends very much on where you shop.

Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow her on Twitter @Tompor.