A Cashless Society – Pros & Cons
There has been a trend in our society towards using credit cards at the expense of cash in the last few years. This has been widely discussed from a macroeconomic standpoint, but rarely has it been looked at through the lens of the consumer. The question remains whether it is a good idea to go completely cashless. The answer isn’t as clear cut as you would think.
Going cashless is undoubtedly much better from an electronic tracking standpoint. There are free apps such as Mint that can track all of your transactions on your credit card accounts and let you know how you are doing on your spending versus your budget. Having that transparency on where you are spending your money is very beneficial. The other side of the coin is that credit card usage is fraught with risk from an outside security standpoint.
Credit card numbers are an enticing target for hackers and they have often targeted retailers like Target and home improvement stores like Home Depot to steal credit card numbers. Cash is targeted when it is left out, but it leaves no specific identification on your finances, which essentially limits the liability. If your credit card number is stolen and fraudulent transactions are made, you are responsible to work with the credit card company to resolve the situation. The worst-case scenario is that you are not watching your credit card transactions.
There are also behavioral risks to changing all your spending with a credit card alone. It is much easier to spend money via credit cards and harder to monitor how well you are doing versus your budget. Cash is something tangible that you have in your wallet or pocket and when you spend it, all you know it. Credit cards have a ton of virtues, but it is important to remember that credit card balances are tantamount to debt. Credit card balances are very hard to pay off when you are living paycheck to paycheck. The reality of paying interest on your credit card balance every month is that it can get you further from achieving financial independence.
The reality of a cashless society is that there isn’t a right or wrong answer. The decision of whether or not to go cashless should be made in every household depending upon whether or not it will drive good behaviors. If you are more prone to going into debt, having paper bills on hand can be a good way to visualize when you can and cannot spend money. If you are good with budgets and paying off debt, there is really no downside to using electronic payments and going cashless other than being vigilant for fraudulent transactions.
You will have to decide which method is better for your personal situation. Our society will probably always have a place for paper bills, but there is no doubt that electronic payments will also continue to grow and evolve. Making sure that you evolve in your personal finance journey is equally as important.