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Consumer Information

From Seashells to Bytes

Electronic Payments: The Wave of the Future, Here Today

Check Use Slowing but Still Important

Cash Is Still Popular

Consumers' Corner

Cash Is Still Popular

abstract image of cash in a wallet superimposed on dollar bill imageIn the United Sates, cash use grew through the early part of the 1990s, but it appears that some cash payments have been replaced by debit cards and other electronic payments.

Cash affords privacy, unlike checks or electronic transactions, which include information about the purchaser. Cash is convenient and widely accepted. The dollar amount of U.S. currency in circulation worldwide has increased almost 88 percent since the mid-1990s. Today two-thirds of all U.S. currency circulates outside the United States.

Federal Reserve: The bankers' bank for cash services

Just as individuals keep money in a bank account, many commercial banks, credit unions, and savings and loan associations put cash in accounts at the nearest Federal Reserve Bank. When financial institutions have more cash than they need to serve their customers, they deposit their excess cash at a Reserve Bank.

When the currency arrives at a Reserve Bank from a financial institution, machines count it, process it to ensure quality, and shred worn-out bills. Cash handling machines also check currency for possible counterfeits, and a Fed employee determines their authenticity. Counterfeit bills are sent to the U.S. Secret Service for investigation.

When banks need cash, they order it from the Fed and have it delivered by armored cars. This currency is either newly minted notes that Reserve Banks receive from the U.S. Department of the Treasury's Bureau of Engraving and Printing or previously circulated notes sent back in to the Fed and processed.

How the Fed processes cash
U.S. Treasury sends
new currency notes to
Reserve Banks.
Reserve Banks
notes to financial
institutions as needed.
Institutions distribute
cash to consumers
and businesses.
Institutions can return excess cash to the Fed.
The Fed culls counterfeits and worn-out currency and recirculates fit currency.

The Fed closely monitors currency to ensure the accounts of the different institutions are accurate. The accounting is handled electronically through secure online connections.

Learn more facts and history about money.