First Person: ATMs Issuing Smaller Bills Is a Good Thing

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Isn't it funny how seemingly small financial changes in the marketplace can have a big impact? I remember the days when I could get less than $20 at an ATM. I would take out $10, or sometimes it would be as low as $5. Then, it became very common for the machine to have a minimum withdrawal of $20. College students across the country groaned, but what could they do? Now, banks are again allowing people to withdraw cash in smaller denominations. Will this change the flow of the economy and cause people to spend differently?

A trend or a fad?

One has to wonder if this is a trend, or if it is a fad that will quickly disappear. Just because one bank is doing it does not mean that others will follow suit. I have to imagine that keeping machines stocked with all different denominations of bills might be a hassle and an inconvenience for the institution. After all, wouldn't a machine be designed differently if it only had to carry one type of currency? This may not be a welcome change for some banks that would prefer to stick with $20 minimums.

Breaking and spending

As a consumer, I know that there seems to be certain behaviors attached to how I spend cash. For example, the presence of the $20 can be a fairly good deterrent to spending. There is a psychology to cash, and it seems like once that $20 is "broken," the remaining cash disappears much quicker. There is something about having intact $20 bills in your wallet as opposed to "smaller" kinds of currency. Granted, I do not think I would want to make constant trips to the ATM machine in order to withdraw $5 bills on a regular basis.

A cashless society

The reality is that this shift may have little impact on how people spend. As a consumer I am consistently moving towards a world where commerce is conducted without cash. There are certainly times when cash is required, but it seems like those instances are dwindling. Even food trucks that pull into the parking lots of businesses are taking credit card transactions with small devices that are attached to smart phones. In the future, smaller denominations of cash at the ATM machine may not matter. Sooner than later there may not be ATM machines. Of course, consumers might spend less if they were forced to use cash instead of credit cards.

Interesting changes. Will they make a difference in the economy? Not very much for me.

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