A Day in the Life of Cash



From purchasing convenience store snacks, to a taco at the local food truck, to repaying a family member or friend, to grocery shopping at the supermarket, many consumers turn to crisp paper currency from an ATM, especially when they need cash fast.  When used at the point of sale, these bills then go into circulation with the roughly $1.55 trillion in other pieces of U.S. paper currency, according to the Federal Reserve.

Have you ever wondered about the lifespan of a $1 or $5 bill printed by the 
U.S. Bureau of Engraving and Printing? Or pondered the path a bill takes before wear and tear causes it to be taken out of circulation and destroyed? It’s all in a day in the life of cash.
 
The life expectancy of Federal Reserve banknotes
– our seven denominations of paper money from $1 to $100 – varies by their face value, how they’re used by the public, and how often they change hands. The three lowest denominations get the most use, likely because Americans are heavy users of cash for low-value transactions, i.e. purchases $20 and under. 

The lifespan of banknotes ranked by the Federal Reserve from shortest to longest are: 

  • $10 bill at 4.5 years
  • $5 bill at 5.5 years
  • $1 bill at 5.8 years
  • $20 bill at 7.9 years
  • $50 bill at 8.5 years
  • $100 bill at 15 years 

After banknotes are printed, the Treasury distributes them to the 12 Federal Reserve Banks, which in turn send the money to financial institutions.

What's the next step in a day in the life of cash? People withdraw the cash and start using it to purchase grocery or personal care items, casual meals, gifts, or to pay someone back.
 
Source: Federal Reserve Cash Product Office

According to the Federal Reserve Cash Product Office, the demand for the supply of cash has increased steadily since 1980. They attribute this to such factors as international GDP growth, interest rates, natural disasters, and new currency design releases.

In line with this growing demand for U.S. currency, our 2017 Health of Cash Study shows that cash continues to be the most commonly used consumer payment method for in-store shopping and person-to-person payments, as well as indicates how consumers use the various denominations of paper money during their lifespan.

For instance, consumers' payment behavior favors cash over other forms of payments at convenience stores, small and local businesses, and  farmers' markets.  What's more, millennial payment behavior is more nuanced than one might expect, which impacts the wear and tear on cash.

In fact, the most recent Health of Cash study reveals that millennials are outsized users (vs. other generations) of both digital payments and cash at such retail categories as grocery and convenience stores, pharmacies, small and local businesses, mass merchandisers and farmers' markets. And when it comes to in-store purchases, a majority of consumers of all ages use cash for purchases under $20, and cash holds its own vs. gift cards for such occasions as graduations and birthdays.

Paper currency also shows up more frequently than digital payments when dining at fast-food restaurants and bars.  Likewise, cash leads when making many service payments - from paying a babysitter to a lawn service. For routine purchases, such as coffee, snacks or lunch, cash is most preferred. And when going out on weekends, four-in-five people are likely to have cash on hand. That's a lot of places for a bank note to pop up on a day in the life of cash!

Wear and tear eventually comes with all that popularity.  When a bill becomes too worn and damaged for use, the U.S. Bureau of Engraving and Printing takes it out of circulation and shreds it, ending its lifespan.

 

Susannah Moore Griffin
Corporate Communications Manager 

 


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