Allpoint Blog

A Day in the Life of Cash

As consumers scurry to buy last-minute holiday gifts, many use crisp paper currency dispensed by an ATM.  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.
Ever wondered about the lifespan of a $1 or $5 bill printed by the U.S. Bureau of Engraving and Printing? Or asked about the path a bill takes before its condition causes it to be taken out of circulation and destroyed?
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 because Americans are heavy cash users for low-value transactions, i.e. purchases $20 and under. Thus, the Federal Reserve has estimated that the $10 bill has the shortest lifespan of 4.5 years, followed by the $5 bill at 5.5 years and the $1 bill, 5.8 years.
At the higher denominations, the $100 bill lasts approximately 15 years on average, with the $50 bill at 8.5 years and the $20 banknote at 7.9 years. Reflecting the $1 bill’s popularity and heavy use, the U.S. Bureau of Engraving and Printing prints about 16.6 million $1 bills a day. Most replace worn, older bills.

After bank notes are printed, the Treasury distributes them to the 12 Federal Reserve Banks, which in turn sends the money to financial institutions. What’s the next step in a day in the life of cash? Of course, people withdraw the cash and start using it to purchase grocery or personal care items, casual meals, gifts, or to pay someone back.
Demand for Currency is Growing graph
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 instrument across in-store shopping and people-to-people 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 study finds Millennials are outsized users vs. other generations of both digital payments and cash at retail categories including grocery and convenience stores, pharmacies, small and local businesses, mass merchandisers and farmers’ markets. And when it comes to in-store purchases, a strong majority of consumers of all ages use cash for purchases under $20, and cash holds its own in a cash vs. gift card matchup for gift-giving occasions.
Paper currency also shows up more frequently than digital payments when dining at fast-food restaurants or at 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 cash can pop up!
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.
Lifecyle of Cash
However, another piece of legal tender has already taken its place.
The vast number of greenbacks and other denominations constantly being printed and put into circulation demonstrates that despite the rise of digital payments, cash continues to maintain an essential role in the payments landscape.
Just check your wallet.

Tom Pierce
Chief Marketing Officer

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