Latest posts by Kumiko Ehrmantraut (see all)
- How to Use Dollar Cost Averaging to Build Wealth - September 17, 2020
If you’ve been to the store recently, you may have noticed a sign talking about the national coin shortage. In June, the Federal Reserve announced that the supply system for coins had been disrupted.
The coin shortage is yet another side effect of the ongoing Coronavirus pandemic. Since March, fewer people have been visiting restaurants and doing their shopping in-person. ATM usage is down, and contactless payments are up.
All of this leads to fewer coins and cash circulating through the economy. Which has led many people to wonder if a cashless society will be part of the “new normal” we’re all experiencing.
Personally, I am not in favor of a cashless society. I think the disadvantages outweigh the benefits, and a true shift away from cash would hurt many people. But I still want to have the conversation and look at some of each scenario's pros and cons.
What is a Cashless Society?
In a cashless society, we’ll rely solely on electronic payments. Banks will no longer produce cash, and every transaction will be done using a smartphone or card.
Many countries have been embracing cashless policies for years. Finland, Sweden, and South Korea are poised to become cashless countries in the next few years.
Here are some of the most popular forms of cashless payments:
- Credit and debit cards: Credit and debit cards are the most popular payment options for most people. And many people are embracing contactless cards, where you wave your card in front of an electronic reader instead of swiping.
- Mobile wallets: Mobile wallets are a secure way to pay electronically. Instead of carrying your credit and debit cards in your wallet, you can save them on your smartphone.
- Payment apps: Payment apps are a popular way to send money to other people. Apps like PayPal, Venmo, and Zelle allow you to send money to other people within minutes.
- QR codes: Paying via QR codes is less common in the U.S., but it’s common in countries like China. You’ll scan the merchant’s QR code to complete the payment transaction.
The Benefits of a Cashless Society
If you’re in the position to take advantage of a cashless society, then you might find it more convenient and safer. Here are some of the pros of a cashless society:
- Cashless payments are quicker: If you’ve ever stood in line behind someone paying with a check, you might appreciate the benefit of faster payment transactions. Cashless payments are quicker, leading to increased efficiency in stores and better customer experience overall.
- Reduced theft in businesses: Anytime you carry cash, you’re at a higher risk for theft. Once cash is stolen, it’s hard to track and recover that money. Businesses that eliminate cash would be reducing their risk of theft, both by employees and potential break-ins.
- Reduced financial crime: In comparison, electronic transactions are much easier to track. When there’s an automatic paper trail, it’ll be easier to catch crimes like money laundering and tax evasion.
- Easier to travel abroad: I know traveling abroad isn’t top of mind for most of us these days. But hopefully, it’ll be an option again at some point. And traveling internationally is much easier when you don’t have to carry cash. Your mobile device will handle the exchange rates for you so you can enjoy your trip.
- Less germs: Cash is extremely dirty. It's been said that cash can carry more germs than your toilet, and it can even carry certain viruses over two weeks. Right now, this might be the main reason why switching to a cashless society is such a hot topic.
The Disadvantages of a Cashless Society
While I acknowledge the benefits of a cashless society, I think the disadvantages outweigh them. Here are some of my biggest downsides about a cashless society:
- It’s harder to track your money: From a budgeting perspective, it’s much harder to track your money when you cut out cash. For many people, the cash envelope system is one of the easiest ways to get their spending in order. It’s not impossible to do this with an electronic tracking system, but it’s harder.
- It’s easier to overspend: Many financial experts recommend using cash because it’s harder to overspend with cash. In comparison, it’s much easier to overspend when all you have to do is swipe your card. This could exacerbate financial problems for a lot of people.
- Economic inequality: Not everyone has a bank account, and a cashless society would hurt many people. There are also a lot of people who can’t afford to buy a smartphone. Unless a special effort is made to help these individuals, the economic gap could become wider in the coming years.
- Less privacy: If you rely solely on electronic payments, you’re sacrificing some of your privacy in the process. You can’t spend anonymously if you give up the notion of paying with cash.
- Possible security issues: Cybersecurity is a growing problem, and it’s only going to get bigger with a shift to a cashless society. Even if your money is returned to you, being the victim of a data breach will cause a lot of short-term problems.
Bottom Line
It seemed like the reality of a cashless society was many, many years away just six months ago. But thanks to the effects of COVID-19 and the rapid shift to e-commerce transactions, it could happen a lot sooner than many of us previously believed.
What’s your take on a cashless society? Are you a fan of the idea, or do you think the cons outweigh many of the benefits?
I prefer cash. I am not a tech savy so call me old fashion I am ok with that. It is proved that cash won’t give you more chance to contact covid than touching a door nob. Here in Canada they suggested to pay with cards but still will take money…so I am all good, well for now! Will see!
Bad idea, I sold a used car to another individual this week. Cash was the only way I could get paid without risking fraud. Mobile payment systems cannot handle the amount of cash to cover the cost of the car.
Good point.
That’s why Dave Ramsey says CASH IS KING 👍🏻
I am not a fan of all cashless spending. I am a buyer for my job and do a large amount of online transactions and experience a lot of fraud with my work credit card as well. The latest I experiences was someone ordered grocery delivery. By the time I saw it at the end of the month and called to see where the groceries went to, the store said they didn’t have records of those online transactions going back 4-5 weeks.
Since I have been using cash for my spending, I have also been able to get my finances under control. It is too easy to swipe and not think about it.
I am not a fan. If there were power outages for extended period of time (hurricanes, tornadoes, ice storms etc)- what swiping would be available? Would ‘pay at the pump’ still work?
Also, how would high school or
college kids get paid for their summer odd jobs? Tip jars would not exist. Birthday money or graduation money from grandparents?
Yard sales in your driveway?
School fundraisers? Craft fairs?
It just leaves an unsettling feeling.
Thank you for all the time and effort you put in to TBM. It is very much appreciated.
I can tell you for a fact. I live in the Northeast and we had a hurricane remnants take out a lot of power. My daughter worked at Hess gas station and they was supposed to have a generator in every store. They didn’t. You couldn’t pump gas (need electric) but you could buy food – ONLY IF YOU HAD CASH. My daughter had to lock the store, but sell from the window and the drawer that gives customers their goods. (Think the old fashioned bank teller drawer that the teller would push out to get your items). She left the cash register open and made change and sold food to all who had cash. The credit card machines were down.
I am against having a cashless society. You couldn’t pay the young boy who mowed your lawn or shoveled your driveway. Your kids wouldn’t know the reward of shaking their jar full of coins for all the lemonade they sold.
Mostly, I don’t need the government knowing everything I buy. That information can be stolen and sold to health care providers, who can raise your rates, or the government can just decide to take some of your money to help the national debt.
I just don’t trust my government THAT much.
I don’t like this at all. My budget since not being able to use cash. I feel like I am starting all over. I go over on spending it is much harder. I had only been doing Cash for 8 mo. I am just having a hard time budgeting. So no not in favor of cashless system but finding it hard to find stores that will take cash at all
My favorite coffee stand went cashless at start of covid, but still take cash tips. Go figure. Emailed company to ask about it, was told that was their new policy. So after 14 years will find a different coffee stand for those rare purchases. Good point about cash only sales when power goes out. I will support businesses that take cash.
I prefer cashless due to where I live, though there are definitely times where cash is necessary (most laundromats in my area are cash-only!). That being said, I’m really glad you brought up the economic inequality aspect to a cashless society. Many people don’t realize the sheer amount of people who rely solely on cash which makes a cashless society completely unrealistic.
I prefer cash. I love the Dave Ramsey envelop system and have been using it for a few years now.
Although I agree with many of your comments this could work if the Feds would change the laws to permit more than 4 withdrawals out of Savings Accounts monthly.
With COVID we have been going cashless for the very reasons you list above. Not our choice but we are trying to still be good stewards of our money.
We opened up a New Checking Account that we ONLY use for Food and we replenish each payday as well as keep $100 balance in the account; just in case. My husband is not into tracking on the Trackers now that he’s not using cash but he has been very diligent in staying to our budget. We do know we are spending more as we used to have cash left at the end of every month that we tucked away for future travel and that no longer exists.
Cashless is safer for small businesses and there is a savings on their insurance as taking money to the bank is risky for someone stealing it from you on the way.
Just need some really smart people to come up with a “cashless” system that mimics cash – then everyone would be happy.
NOT A FAN! this would mean that we no longer have control and they DO! We need to be persistent in using cash. A family member went to a fast food restaurant that said they were only taking e payments and when she went to pay all she had was cash. After a couple minutes of conversation and my family member saying cash was all she had, they accepted payment. So we need to continue using cash!!! If they want our business they need to accept our CASH payment! #keepusingcash!
It is way to easy to spend money. When you handover cash you think about it first, when your hand over plastic it goes a lot easier. Not a fan of a cashless society.
I definitely have had to put back those cookies and brownies when I’ve gone over my food budget haha. With a card I wouldn’t have cared at the moment but then I would have beaten myself up about it later on because I know I was spending more than I should have. Cash has kept me on track!
I didn’t start using cash until I started following Miko’s tips. (I would have cash on hand from time to time). Using my card was killing me! I was swiping left and right. I hated checking my bank account because I didn’t want to see my money dwindle. It was hurting me. Using cash has definitely helped me budget better! I also worry about the security of some of these apps or people hacking into bank accounts. It’s scary! I agree it would also widen the economic gap for those who can’t have a bank account. I do like the convenience of a card but I agree, tracking is tougher!
I just started budgeting using your system of cash envelopes. I love it! It feels good to pay w cash. I paid cash for all my daughters school clothes and supplies. I do not like using credit cards.
I’m not in favor of a cashless society, by any means. I have always wanted to skip the bank anyways.
Can you emagine for someone that lives paycheck to paycheck how devastating it would be if there was a cyber security attack.
This is very true. I was just to start my journey with my cash envelopes when covid hit. Now my saving skills haven’t really improved much
I totally agree it’s really easy to buy something with a card and 3 months later report the charge as fraud to the credit card company or bank.
I’m torn. I don’t use much cash these days but I don’t think a cashless society is the way to go either. I find it easier to track my budget with my cards but can see how some use the cash envelope system being better for them.
I prefer cash but it’s so much easier to use debit cards. I used digital envelopes. If they would put an e-ink screen on the cards with current balances, that would keep me on track!
I have been using the budget by paycheck method for 3 years now. Just preordered my bundle, disappointed that the wallet has sold out. Will you be bringing more back later? Hopeful.
Here in Canada, we got rid of the penny. It makes things a bit more confusing as you have to round up or down based on the price. I actually like cash better as when it leaves your hands you kind of realize more what you spent it on. Swiping a card or putting a card to a machine just doesn’t have the same impact of feeling the money is leaving your account