For about 20 years, beginning in the 1990s, Ithaca had an independent local currency system. It produced notes in equivalencies to dollars, called Ithaca Hours, which could be spent at participating businesses, which would accept a certain number of Hours per transaction.
You could get Hours by becoming a member, paying $10 to offset the system’s dollar expenses and receiving $20 in Hours.
Member businesses and individuals could then earn Hours (and of course, additionally, dollars) by promoting their services, goods to sell, or other entrepreneurial activities in an Hours Directory.
The system eventually began to stumble when, in what ultimately amounted to a financial revolution, cash use in general dropped as credit card use ascended.
When Hours began, credit cards were used relatively rarely, generally for major purchases, not frequent or daily ones. Back then it was common for businesses to require a minimum purchase to use a card.
At that time, Ithaca’s GreenStar Market, for one prominent example, didn’t accept cards at all. It was cash, check, or Hours only, with $5 in Hours accepted for a minimum $10 purchase.
The upheaval began when banks and other institutions started flooding the market with cards, trying to spur regular use. They eliminated financial requirements and opening fees. They lowered interest rates, at least to start. They made cards faster and physically easier to use, with electronic terminals replacing cumbersome manually-operated swipers (“knuckle-busters,” as they were called). They provided premiums and discounts for use.
Cards became a bonanza for banks and processors, with fees and percentages taken from burgeoning millions of sales.
For many businesses, larger ones especially, the costs were acceptable because of the convenience of cards and the increased spending they could prompt.
Even if businesses minded the expense, it didn’t matter. Cards became ubiquitous, thus essential.
Soon customers were using cards for even the smallest purchases: a cup of coffee, a pack of mints.
For cash, once king, the coup d'etat became a fait accompli.
Today there are interests that would like to finish the job and take cash to the guillotine. First among them, of course, is the credit card industry.
Banks and major retailers also have an interest in scaling back or eliminating the complexities and time involved with cash.
But smaller businesses that necessarily deal regularly with cash are already facing hardships with a current disappearance brought on not just by general disuse but amplified by the pandemic: of coins, now, with a fear that bills might be next.
Apparently, consumers are taking coins home and leaving them there rather than putting them back into circulation: maybe a fear of germs, or maybe just too much bother for too few cash purchases.
This has produced a national coin shortage that, in June, prompted the Federal Reserve to limit orders from banks. Coins simply weren’t available in sufficient supply.
Trade groups representing grocers, gas stations, convenience stores, and others called the situation an emergency that threatened their businesses.
Some larger businesses have been accused of profiting from the problem. The Chipotle restaurant chain has been sued for its recent policy of not giving coins in change for cash transactions, rounding transaction totals up, not down. Allegedly it has cost patrons millions.
As in the dichotomy between small and big businesses, individuals of less resources are feeling the negative effects of an increasingly cashless society first and most keenly.
How many people rely on cash? Studies show that 80 million Americans are “underbanked:” that is, without access to one or more basic banking services, such as a bank account, credit card, or debit card.
Even people with cards, but with tenuous finances, will often prefer using cash, to avoid interest charges and fees that are often exorbitant. At a time when interest on money is practically zero, interest charges on cards generally start at 12 percent and can double for so-called “less qualified” customers. A day-late payment can typically cost $35. Some prepaid cards and other services charge fees for failing to maintain a minimum balance.
Cashless forms of payment also require surrender of anonymity and privacy, a political or personal issue for some.
The Ithaca Hours system called itself a means of creating “extra money.” In its heyday it circulated about a quarter-million dollars in local currency. The organization issued grants to charities and not-for-profit groups and made loans, without fees or interest, to members.
The system provided not just money but autonomy. The organization kept no records of any activity other than its own. Members were free to negotiate use however they wished.
Another byword of the Hours system was a belief in “value through sharing, not scarcity.” These might be words to consider as certain types of open money get scarcer and the balance tilts toward increased cost and outside control.