Sweetgreen is one of many restaurants that are going cashless. Image by Tony Webster licensed under Creative Commons.

What’s in your wallet? It’s more than just a popular slogan now that some area restaurants are going or have already gone cashless (meaning they don't accept cash), which puts some customers in a bind. Beyond limiting dining options, going cashless also has broader implications for low income citizens.

If you haven’t noticed that local salad chain Sweetgreen doesn’t accept cash, it may be because you’re part of the 68% of the United States population that has a bank account (and access to a debit card) or among the more than 159 million who have a credit card.

As society embraces credit over cash, it has the potential to further exclude those who don’t have credit or debit cards, bank accounts, and traditional resources like loans and secure storage for their funds. A family that can’t rely on normal financial services may have difficulty building family wealth because they’re cut off from tools that help build financial stability.

Who does not have a bank account or a line of credit and why not?

People who don’t have bank accounts are considered “unbanked,” while those who have bank accounts but still use payday loan companies, pawn shops, auto title loan companies, and rent-to-own companies are considered “underbanked.”

In the United States, 15.6 million adults and 7.6 million children are unbanked and 51.1 million adults and 16.3 million children are underbanked, according to a 2016 report. In DC, about 108,000 to 225,000 residents (38% of the population) are either unbanked or underbanked. Most DC residents in these two categories live in Wards 1, 4, 7, and 8.

The FDIC found that the majority who were unbanked said that they didn’t have enough money for a bank account, and that banks were not interested in having customers like them. Others have applied for credit, only to be rejected. About 10.9% say they don’t trust banks and 9.4% said that banking fees were too high. What happens when citizens aren’t able to access the same secured banking services as everyone else?

People who don’t use banking services have a harder time with housing and dining

Because the unbanked and underbanked are more likely to use alternate sources of credit, like payday loans and check-cashing places that charge high fees or rates of interest, they end up spending more money overall in exchange for having cash immediately. Bank on DC, a program from the DC government that partners with banks and nonprofits to offer financial services to the unbanked and underbanked, reports that DC residents spend about $800 per year on check cashing services and fees for money orders.

Another implication for being unbanked and underbanked is that those without much of a credit history can face higher housing fees like security deposits, and make it harder to obtain basic services like internet, because those companies often do credit checks. These fees and costs pile up, making it harder to stretch a dollar further.

What is being done about this?

In many ways, Sweetgreen going cashless is just the beginning. Visa recently offered $10,000 to restaurants to go cashless. It portends a future where online payment and money transfer services are dominant, which offers both opportunities and restrictions for low income residents.

For example, the FDIC found that 77% of citizens who used an alternative financial service used money transfers and sent money to a foreign country. With online money transfer services like Venmo and Google Wallet becoming part of a burgeoning market, they offer the underbanked a fast and cheaper way to transfer money online. On the other hand, online services like these rely on bank accounts and credit cards which still don't help the unbanked obtain vital services.

Bank on DC helps residents get bank accounts with low fees and low account minimums, which is a big barrier to residents whose income isn’t steady or don’t qualify for what banks typically require. Program officials believe that the unbanked and underbanked would be able to use important financial services if certain obstacles were removed from their path, like barriers to financial education. Bank on DC clients also qualify for discounted Capital Bikeshare accounts.

Experts say that beyond society going cashless, the more pressing issue is that the unbanked and underbanked aren’t using financial services at all, which could leave them more vulnerable for theft and identity fraud. This isn’t merely a national phenomenon; cities all around the world are racing to go cashless. As society makes progress in technology, we should keep in mind those who still lack the basics, like a bank account, and how they could be left behind.