Is cash better for the environment than a credit card?

Illuminating answers to environmental questions.
April 14 2009 6:46 AM

How Green Are Greenbacks?

The environmental impact of cash and credit.

$10 bill.
Is cash better for the environment than a credit card?

What's the most environmentally friendly way to spend my money—cash or credit card? Credit cards are made out of plastic, which I know I'm supposed to avoid. But it can't be good for the planet to make all that cash and truck it around the country. …

Ah, cash or credit—the million-dollar question. As far as the Lantern can tell, no one has published a cradle-to-grave analysis of either a dollar bill or a credit card. (Funny, the financial industry must have other things on its mind.) So we'll have to do the best we can with some back-of-the-envelope calculations.

Let's start with the raw materials. Most credit cards are made out of polyvinyl chloride. PVC, like all conventional plastics, is an oily beast: It takes about 4.25 grams of petroleum to manufacture one 5-gram credit card. Multiply that by 1.6 billion—the number of credit, debit, and ATM cards produced in America in 2007—and we're looking at roughly 45,000 barrels of oil a year just to make the plastic that feeds our late-night eBay sprees. Granted, that's a drop in the bucket compared with the 20 million barrels Americans consume daily. But those figures don't include the billions ofgift cards, loyalty cards, and store charge cards we stuff in our wallets each year.Add that to the fact that PVC is rarely accepted by curbside recycling programs and can produce harmful dioxins if incinerated, and you can see why some organizations suggest using alternate materials for short-term consumer products like credit cards. (The card industry is starting to experiment with compostable PVC and biopolymers, but we're still a long way away from corn-flavored MasterCards.)In theory, plastic credit cards could last about eight years in our wallets. Instead, we cut them up when they expire—usually after two to four years.

Paper money has its downsides, too. A $5 bill typically lasts just 16 months before it wears down so much that it's taken out of circulation. (Other denominations can go for longer.) The currency itself is made from a blend of cotton and linen—products that may be renewable but whose cultivation requires a lot of land and other resources. Conventional cotton farming is a particular bête noire of the environmental movement, due to its heavy use of water, pesticides, and fertilizers. And according to the best numbers the Lantern can find, cultivating, harvesting, and ginning 1 kilogram of cotton can be almost as energy-intensive as producing an equivalent amount of PVC.

The materials that go into paper money aren't freshly harvested, though; dollar bills are made from recycled, low-quality waste fibers that would otherwise end up in a landfill. Crane & Co., the company that supplies all the paper for U.S. currency, also earns eco-cred for its investment in alternative energy and local conservation projects.

So far, advantage cash. But here's the first major sticking point in our analysis: Unless you plan on buying things in round dollar amounts only, paying with paper also means paying with coins. Extracting metals is not only environmentally taxing, it's also energy-intensive: Mining, milling, and smelting a kilogram of copper, for example—which is used in all our coins—takes about 109 megajoules, as compared with 60 megajoules for a kilogram of PVC. Based on the Mint's production figures and coin specifications, some 41,000 tons of metal were used to make America's change last year. That doesn't mean all that metal has to be taken out of the Earth, though: Some is recycled from older coins that make their way back to the Mint.

Then there's the tricky question of which option is greener on a transaction-by-transaction basis. At first blush, paying with plastic seems like the more environmentally friendly choice. After all, a credit card payment uses just a bit of electricity and produces a couple of slips of receipt paper, right? Cash, on the other hand, racks up miles on the road as it circulates among merchants, banks, and the Federal Reserve. A 1999 study on the life cycle of Swiss banknotes, for example, concluded that the storage and processing phase accounted for just less than half of that currency's overall environmental pollution.

When those impacts are averaged out across all cash payers, though, the effects may not be so large. In 2003, for example, the European Central Bank determined that about eight euro banknotes were produced for each European citizen. The cumulative environmental impact of those bills, from production through circulation and disposal, was equivalent to that produced by driving a car one kilometer. And without better information about what kind of strain our electronic payments are having on the world's data centers and third-party processing offices, we can't really make an informed comparison.

Until some enterprising young sustainability expert decides to tackle a proper life cycle analysis—one that takes into account not just the raw materials and transport issues but also the impacts of manufacturing the final products—the question of cash vs. credit will remain little more than an eco-nerd parlor game. In the meantime, focus on those spending habits where you can have a direct, immediate impact, like cutting out paper billing and opting for e-mailed gift certificates over the plastic variety. You can also ship your expired PVC cards to Earthworks, a company that will recycle them into new gift cards.

Of course, the question of cash-vs.-credit is just a fig leaf for the real issue when it comes to spending and sustainability: our national love of buying a lot of crap. Since credit cards encourage us to spend beyond our means—and our needs—you could argue that they'll always be the least environmentally friendly choice.

Is there an environmental quandary that's been keeping you up at night? Send it to, and check this space every Tuesday.



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