Nervous about data breaches, consumers are cashing in

Loretta Mulqueen hasn't touched her credit or debit cards for six weeks.

"Just the thought of using them makes me nervous," the Mound resident said. "I use cash or checks for everything now."

She started doing that when the news surfaced about the data breach at Target stores. By the time the FBI announced two weeks ago that it had uncovered 20 similar retail-store hacking cases last year, Mulqueen was convinced that she was on the right track.

"Sometimes it's tough," she admitted. She's leery about carrying large amounts of cash everywhere she goes, so she estimates the amount of money she'll need for that day's shopping and stops at the bank on her way to the stores. If her estimate turns out to be low, she might have to go without something she wanted. "But I had to do something" to protect herself from fraud, she said.

In a recent public opinion poll, 37 percent of U.S. shoppers said they're using cash more after the data breaches. The survey, conducted by the Associated Press and GfK Roper Public Affairs & Corporate Communications, was done in mid-January, a month after the Target breach was made public.

Analysts predict that wary consumers will go back to using their cards as soon as the scare has passed. These sorts of dips in credit card use have happened before, most recently during the 2008 banking crisis. By the middle of 2009, everything was back to normal.

But in the meantime, cash has panache, especially when it comes to incidental spending — the morning coffee, noontime burger or post-work beer — that people used to routinely ring up on their credit and debit cards.

At this point, any evidence of increased cash use is anecdotal.

Spending on everything from cars to Happy Meals was down in January, a drop blamed on the abnormally cold weather that engulfed most of the country. Credit card companies say it could take months to analyze how much of the reduced card use was a result of a switch toward cash purchases.

And banks aren't seeing a tidal wave of cash flowing out of their vaults, said Joe Witt, president and CEO of the Minnesota Bankers Assocation.

"It's still possible that it's happening," he said of the increased use of cash. "We're just not seeing it."

Using cash can be a benefit for some people but a problem for others, said Geoff Bullock, a financial educator at Lutheran Social Service of Minnesota.

Cash purchases can be helpful for people who have lost touch with the fact that the cards represent money.

"They use the card so often that there's no thought process to it anymore, and then it becomes very easy to overspend," Bullock said. "With cash, when it's gone, it's gone. If you set aside a certain amount of cash for eating out during the month and there's no money left after three weeks, you know that you're eating at home the rest of the month."

But if a person doesn't pay attention to where the cash is going, it can disappear in a hurry without leaving much of a trace of where it all went.

"That's where credit cards are helpful because you can go online and get a printout of everything you spent," Bullock said.

Joli Hummel of Richfield is one of those people who likes to look back and see where she spent what. "If I have cash, I just end up spending it," she said.

A study by Tufts University's business school (done in September, well before the recent card breaches) found that men use 50 percent more cash per month than women. Men are much more likely to make sure that they always have at least some cash on hand, and even when both sexes carry money, men tend to carry twice as much as women.

The difference might have something to do with all the coins a person gets in change, Johnson discovered as part of her conversion to cash.

"Men walk around with pockets full of change, but women's pants aren't designed for that," she said. "So I throw it in the bottom of my purse until it starts to weigh me down."

As for the influence of age, the Tufts study found that people over 55 use cash the most, with the frequency of cash purchases dropping along with the consumer's age. By the time you work your way down to people in their late teens and early 20s — the all e-generation — carrying cash becomes an alien concept.

"You go on college campuses and even the vending machines take credit cards," Bullock said. "They use them for everything."

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