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Throwback Products We Love: Cash


Cold, hard and plentiful -- that's how we like it. This holiday season, cash will be king again.

This year is the 20th anniversary of the Martin Scorsese classic Goodfellas, and in that vein it pays to remember a memorable scene near the end of the film. In this scene, Ray Liotta's lead gangster, Henry Hill, visits boss Paul Cicero (played by Paul Sorvino), after being arrested for orchestrating a drug ring behind Cicero's back.

A tearful Hill tells Paulie that he has nowhere else to turn. Paulie pulls out a sweaty roll of cash – cold hard cash – and hands it to him, saying, "And now I must turn my back on you." As Liotta's character says in voiceover, "Thirty-two hundred bucks. That's what he gave me. Thirty-two hundred bucks for a lifetime. It wasn't even enough to buy a coffin."

These days, Paulie might have given Henry a gift card. But then it was cash. And cash, still holding the line against credit cards and other assorted plastic, is making a comeback.

Money is among the most wanted gifts for this holiday season. A recent Consumer Reports Holiday Shopping Poll found that 58 percent of people plan on giving cash as a gift. This mirrors the trend from last year, too, when Western Union concluded in a consumer survey that cash was the most desirable holiday gift.

"You can't fault consumers for focusing on the fundamentals," said Tod Marks, Consumer Reports senior editor and resident shopping expert. "Cash makes a great gift because people can buy something they really need or really want."

This isn't surprising given the still fragile state of the economy, particularly outside New York and Washington. For some time it appeared that cash was on its way to the dustbin of currency history. People look at you funny when you pay cash. Credit card companies and banks fantasized about a day when wallets held only plastic. Plastic can be tapped at subway turnstiles or Starbucks registers.

But over the last two years cash has maintained a following, one that appears to be growing. Finance guru and televangelist Dave Ramsey is but one prominent example. His message marries Christianity and frugality – find God and lose your credit cards – and combats the consumption sermons found in many churches during the housing boom. His devotees pay cash for everything, as Megan McArdle wrote in The Atlantic last year.

"[Ramsey] is so serious about shunning debt that his Web site takes only debit cards; try to pay with a Capital One Visa, and the system rejects the card, then tut-tuts at you. These simple, austere, unbreakable rules are, as Ramsey likes to say, 'the advice that God and Grandma gave you.'"

Put simply, when you drop down that plastic, it spells trouble. Cash is dirty, real. Forced to hand over your last few bills makes you stop and ponder that purchase. Do I really want to pay five dollars for this caramel macchiato at Starbucks?

Many Americans are following that philosophy. Which is a good thing. The number of credit card transactions processed by the four major lenders – Visa (V), MasterCard (MA), Discover (DFS), and American Express (AXP) – has either dropped slightly or held relatively steady this year, according to a recent Smart Money report. But consumer spending is up a few percent, meaning people are using cash more often. (Gift cards are also still wildly popular, but despite new rules introduced to protect consumers who buy them, the "like cash" cards still come with strings attached.) In addition, debit card purchases – basically cash – have grown 15% this year.

It is enough to make those dead presidents feel safe that their second lives have more to go. Time to take out your old money clip – that sweaty wad of cash isn't going anywhere.
No positions in stocks mentioned.

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