I’m looking in my wallet right now, and not counting the $4 in “extrabucks” from my CVS pharmacy, I’m carrying $20.75.
And at least a few days a month, I don’t carry any cash at all. Does this mean I’m broke? Sure, I’m a writer — but I hope not. There’s another way to interpret how people like me fit into the larger scheme of things financially.
First of all, anyone carrying roughly $20 falls right into the majority, according to a new Bankrate report. They found that about eight in 10 Americans carries $20 or less each day, and that includes the 9 percent who don’t carry any cash at all. (Maybe they carry one of those extrabucks vouchers, but otherwise, it’s nada.) Eighty-six percent of women carry less than $50 on a daily basis, compared to only 70 percent of men.
And second, we’re largely moving in a cashless direction. First magnetic-stripe cards, then the Internet and mobile technology made this possible. People stand in supermarket lines and swipe debit or credit cards. They grab a java at Starbucks and stick their smartphones next to a small screen that beeps when it reads a QR-like code. (You can also shake your phone to pay.)
People send money back and forth through PayPal and bank services such as popmoney. More large banks (such as Citibank) allow you to deposit checks via smartphone just by taking a picture of them. We buy items online by entering our banking information, which can be stored for the next time we shop that website.
And the list goes on: RFID-enabled stickers for your mobile device can be touched against in-store payment consoles at cash registers to buy things. E-Z pass systems allow us to zip by on highways without stopping to pay tolls.
And did someone mention Bitcoins?
So dollars and cents are turning into ones and zeros, though some stalwarts remain out there. Seven percent of Americans typically carry $100 or more, the Bankrate reports shows. If you visit small resort towns, it’s common for the merchants there to take cash only.
Cash is the only form of payment accepted at folksy events such as garage sales, though if the vendor has a Square account and card reader, they can take your plastic with an iPhone, iPad or Android phone for a 2.75 percent service charge. And if you want to pay the babysitter or neighborhood kids at the lemonade stand, it’s a safe bet that they can’t swipe a card. Not yet, anyway.
“If we move to a truly cashless society, it won’t be much of an adjustment for most Americans,” says Greg McBride, Bankrate.com’s chief financial analyst. “Since the vast majority of Americans carry $50 or less on a daily basis, that seems to indicate it’s more out of necessity than a desire to pay with cash.”
McBride’s got a point. There’s little doubt where the tide’s turning, at least here in the U.S. According to this new CNN infographic, our country stands at the tipping point — 80 percent cashless. That’s far ahead of India (32 percent), but behind Canada, France and Belgium (which stands at 93 percent).
And there’s no denying it: Cashless equals convenience.
But a cashless economy has some serious pitfalls.
If the 2013 Target data breach taught us anything (where some 40 million customers had their credit data stolen), it’s that magnetic-striped cards are vulnerable. The technology to fix this exists, as Europe employs an embedded-chip system to prevent hacking. But that won’t happen in the U.S. for more than a year, as the switch to chip cards will happen in October 2015.
And should you lose your smartphone — what with any number of stored passwords and banking information in there — you could be out a lot more than just the cost of the device. Yet by and large mobile is an overwhelmingly safe way to move cash and purchase. Mobile payments continue to skyrocket — doubling in the last year and expected to grow 43 percent annually through 2018, according to Forrester Research.
Whether you’re a fan of going cashless, carrying cash or both, here are some helpful tips to keep in mind:
1. Nothing beats cash when you’re mulling a high-ticket purchase or need to stick to a tight budget.
There’s something about the psychology of parting with physical cash as opposed to using a card or smartphone that helps a person reflect on the purchase decision. Put another way: Cash often makes us more disciplined, while it’s easier to spend on things you don’t really need when the purchase process is frictionless – as easy as a button push.
2. Watch out for hidden fees associated with cashless transactions.
While in many cases these fees are open and reasonable (as with Square), in some cases they’re unexpected. Nearly all pre-paid debit cards come with activation and monthly maintenance fees; credit cards have annual fees that could set you back upwards of $100.
The irony here is that cash, while it has obvious monetary value, comes free — no fees involved when actually you use it. (Yes, there are ATM fees, but you can easily avoid them if you withdraw at a supermarket checkout, for example.) One cash-related fee that comes to mind involves counting up loose change at a bank or through Coinstar terminals. The latter charges 10.9 percent unless you get a nationally branded gift card or eCertificate. (Cashless strikes again.)
3. If you go cashless, take advantage of tools to track your spending.
It’s easier to overspend with credit and debit cards than with cash. The upside is that payment cards allow you to organize your cash flow habits for the year, which is certainly cleaner than a handwritten checkbook ledger and trying to remember where you spent your last $20 bill last weekend. Keeping and organizing receipts is easier, and you can categorize effortlessly using free online personal finance tools like these.
So while going cashless may make it easier to spend your money, and get charged for the privilege, cash itself is harder to keep tabs on in the larger financial picture. Indeed, we may go totally cashless at some point, that girl at the lemonade stand whipping out her smartphone and Square. Until that day, it’s sensible to use both — and find the mix that works for you.