Advantages Of Cash
Everyone wants to spend their money in the smartest way possible. The convenience of using cash is subjective as everyone has their personal preference, but there is no denying that less people are paying with cash nowadays. A 2017 survey conducted by payment processor, TSYS, revealed that only 12% of people preferred using cash out of 1,000 people surveyed.
There are several methods of payment that offer unique benefits such as checks, credit cards, debit cards, cash, electronic payments, charge cards, and more. According to the same survey from TSYS, the majority of consumers prefer to pay with debit cards with 44% of participants saying it is their go-to payment option.
According to the PYMNTS Global Cash Index™ United States Analysis, despite cash transactions decreasing over the past several years, overall cash usage has remained quite steady.
What does all this mean? Despite changing times and the increasing number of mobile transactions and card payments people are still utilizing the traditional payment method.
Next time the cashier asks you if you will be paying with cash or credit, it can be wise to think about why you should or shouldn’t say cash.
Pros of Paying with Cash
- No hidden fees: one of the biggest positives of paying with cash is that there are no additional charges after you have made your purchase. Credit cards have interest rates and other fees that will incur extra cost over time. Paying with cash will eliminate any extra fees that may apply when paying with plastic.
- Helps reduce/avoid debt: paying with cash allows the buyer to avoid going into debt or adding to existing debt. When you pay with cash it is impossible to overspend- you can only spend what you currently have in pocket.
- Reduces impulse purchases: everyone is guilty of making impulse buys. If you are on a budget then paying with cash will make sure you stick to what you need- saving you money.
- Accurate budgeting: paying with cash helps control spending. Relying on cash to pay the majority of your expenses can help you create a better, more accurate budget.
- Value of a dollar: using cash forces people to see their physical money being spent and leaving their wallet. Seeing every dollar being spent can encourage you to brainstorm ways to save money by reducing spending.
- Eliminates balances: buying with cash means that you will never have an outstanding balance for that purchase.
Cons of Paying with Cash
- Bad credit: one of the biggest downfalls of paying with cash is that it does not allow you to build your credit. Credit cards and other services are what are used to build and improve credit. Paying with cash will not do anything to improve or increase credit.
- ATM withdrawal fees: one downside of paying with cash is that if you are not near an ATM run by your bank then it will cost a fee to take money out. Alternatively, in order to take cash out of your account you will need to enter your bank- which may not always be in your vicinity when traveling.
- Limitations: there are some services that refuse payment with cash. Making a reservation at a car service or hotel require a credit card in order to make the reservation.
- Lost money: when you lose a credit or debit card you can call your bank to have it cancelled and they will issue a new card to you. If you lose cash then that money is gone and there is nothing that can be done to change the circumstance.
- No automatic recordkeeping: when you pay with a card your transaction is automatically recorded in your banking database. This allows you to see timestamps, pending transactions, and every single transaction that has been made. When you pay with cash you must rely on manual recordkeeping to keep track of your transactions in order to properly budget.
- A target: carrying cash can potentially cause you to become a target for crime. If you take out your wallet to pay with cash at a cash register, it is possible someone with ill-intent may see and decide that you will be their victim. Additionally, if you lose your purse or wallet, the chances of it being returned with all the cash untouched is unlikely.
- Overspending: while paying with cash doesn’t allow you to overspend your account, it does make it easier to spend more than you intended to. Having cash can give a false sense of financial security. If you go to the store for one specific item it can be easier to feel that you have more money to spend, causing you to add a few more items to your cart.
Should You Pay with Cash More?
Choosing a payment method comes down to what you are comfortable with and what makes the most sense for your current financial situation. What are your spending habits and what are your short term and long term financial goals? There are people who choose to have a cash-only lifestyle, but for most this may not be ideal or possible.
If you have good credit, then it may be a good idea to think about paying with cash for more of the transactions you make on a day-to-day basis.
A lesson everyone needs to learn and remind themselves of is that paying with cash and paying with a credit card are completely different. Credit cards can make it easy for people to spend money they do not have.
If you have issues with overspending, subsequently finding yourself in debt, then it is a good idea to switch to cash. As mentioned previously, paying cash will not increase debt and allows you to pay off debt more easily.
A trip to your bank to discuss your best payment options may prove beneficial. Dealing with finances can be confusing and it is important to understand your finances fully and how to obtain your goals. Switching to a mostly cash payment method may be just the trick for you.