Cash is great, except when you don’t need it. Pay for an $8.17 lunch with a $10 bill, and you’re left to tote around a bill and seven coins the rest of the day. Behavioral economist Dan Ariely calls this the negative utility of loose change: “It’s unpleasant, it’s in your pocket, it takes up space, and you can’t get rid of it.”
But your irksome nickel is another’s opportunity: On the subway and the street corner, people are waiting to take that money off your hands. From your perspective, it might be easier to hand over the change to a street performer or charity than to take it home and deposit into your own coin collection.
Just how much cash changes hands in this manner? More than you might think. Consider that more than $40 billion worth of U.S. coins are in circulation. Coinstar, a business built solely to capitalize on the inconvenience of loose change, takes in 50 billion coins a year, worth $3 billion. It estimates another $10 billion is accumulating in the nation’s piggy banks and seat cushions.
Salvation Army bell-ringers collected $148 million in their red kettles last Christmas season alone. UNICEF’s orange Halloween boxes have brought in $164 million since the campaign began in 1950. The company that makes those spiral coin funnels claims that people have dropped more than $200 million into them over the past 25 years, with much of that going to nonprofits and charity.
The New York subway system has some 200 registered buskers, performing 150 shows a week. If the average three-hour show brought in $100, that would amount to almost $8 million a year. That’s not counting the illicit mariachi and break-dancing shows that take place in moving subway cars, let alone all the panhandlers. A survey by the National Coalition for the Homeless, a D.C.-based advocacy group, found that a typical panhandler works one or two three-hour shifts per day, making an average of $31.50 per shift. Multiplying by the estimated number of people actively soliciting on the streets across the country, the coalition estimates that panhandlers take in more than $100 million annually.
A dime here and there is a plink in the bucket for us, but not so for the homeless, the street performers, or the Salvation Army. Yet coins might not be around forever. What will become of the loose-change business model if society goes cashless?
The charities will have an easier time adjusting than the beggars. The Salvation Army has already started working on the problem. It has been accepting donations on the Web for years at OnlineRedKettle.org, and in November it announced that bell-ringers in several cities would start using mobile phones equipped with Square readers, allowing for in-the-field giving via credit card. UNICEF’s orange boxes have also started accepting smartphone donations via scannable Microsoft Tag codes.
These organizations are clearly equipped to accommodate electronic donations. The more pressing question for Salvation Army et al. is whether people will give as much when they don’t have change jingling in their pockets. Not only do credit-card transactions take longer, the money comes straight from our bank accounts, so there’s no sense that we’re giving away something we wouldn’t use otherwise. It’s also unclear that people get the same “warm glow of giving” from electronic transfers, says Ariely, who wrote about the psychology of money in his book Predictably Irrational.
On the bright side, those who do engage in credit-card giving are likely to fork over more, since they won’t be limited by the amount of money in their pocket. And while this will be no consolation to charities such as the Salvation Army that depend heavily on coins, their loss might be other causes’ gain. Online giving has been rising steadily, and electronic transactions have made it easier for charities to collect a buck or two from customers in grocery-store checkout lines rather than outside in the parking lot.
But what about people who depend on spontaneous giving? A bureaucracy such as New York’s MTA might be able to work out a convenient electronic payment system for its authorized buskers. Informal street performers and panhandlers, though, will have a harder time. Square readers aren’t expensive—in fact, the company gives them away to those who sign up for an account—but for now they have to be attached to a mobile phone, which does cost money. It’s one thing for a juggler to pass his hat after a performance; passing around an iPhone would require another level of trust.
And while many homeless people have cellphones these days, holding them out to passersby for credit-card transactions might undermine their message of need. Denver and other cities have installed converted parking meters near panhandling hotspots, asking people to give to city-sponsored homelessness charities rather than directly to the needy. Backers of the meters say they benefit the homeless more than direct donations, because the money goes to job training and housing that individuals couldn’t otherwise afford. In theory, the same model could work for electronic donations.
The problem is that it doesn’t seem to work very well. Denver’s meters brought in about $30,000 in coins in each of the first few years, but donations have slid since, and similar programs in other cities have petered out. That bears out the theory that people are less likely to give when they’re not face-to-face with a suffering individual. “There’s no heartstring attached to putting money in a meter,” says Neil Donovan, executive director of the National Coalition for the Homeless.
Cashlessness won’t necessarily leave the homeless out in the cold. People could still give them actual goods, or vouchers for free meals (an idea that was briefly popular in the early 1990s). Donovan notes that many homeless people already treat some donated items as if they’re currency, accumulating and trading them for things they need more. But for those most urgently in need, there may be no substitute for good old-fashioned money. Coats aren’t like coins—people don’t often walk around with extra winter clothing they’re desperate to get rid of.
I asked a panhandler outside my local grocery what he’d do if people no longer carried loose change. “That’s a good question,” he said, and pondered a moment. “I guess I’d have to ask them to go in and buy me a little food.” Not a bad idea, I agreed, and handed him some coins for his trouble.