Going cash-free is becoming more and more popular---offering a quick, easy way to pay, and protection from loss or theft. The pros and cons of going cash-free

Have you noticed people don’t pay with cash much anymore?

For small and large purchases alike, consumers prefer credit card payments and money-sharing apps. Only 14 percent of purchases are made with cash, according to Consumer Reports.

Maybe you’ve thought about ditching cash altogether. This approach can streamline your financial life, especially if most of your essential payments are electronic already. Cash takes up space in the wallet, too, and is easier to lose.

David Wolman, author of The End of Money, predicts a cashless society soon—citing new payment tools, increased reliance on cell phones, and “the rise of virtual and alternative currencies” as some trends to watch. Sweden’s economy has already gone practically cash-free, via debit cards and a popular mobile payment app called Swish.

So should you jump on the cashless bandwagon now? Consider these pros and cons first. Then take a look at some common cash alternatives and how they’re used.

Why go cash-free?

Extra theft protection

You have options if a credit card is lost or stolen, or if an unauthorized person somehow accesses your online accounts. You can replace a card or cancel a payment. Credit card users are protected from fraud through the Fair Credit Billing Act.

Meanwhile, we’ve all lost cash at some point in our lives—and with no paper trail (or e-trail), missing cash can be tough to get back.

Complete transaction records

With electronic payments, you have an automatic record of how much you’ve spent and where. Financial planning is easier when you can see your expenses and purchases clearly. You can upload spending info to an online budgeting app for the extra planning help.

If every payment’s traced, you won’t be spending time tracking purchases yourself or wondering where all that cash went.

Benefits and bonuses

The more you use credit or debit cards, the more likely you are to qualify for benefits like cash-back points, travel mileage, and purchase protection policies. Certain brand apps, like the Starbucks app, even offer discounts and rewards for frequent purchases.

Convenience

No more frantic ATM stops or dollar bill counting. Cash-free payments become especially handy when you’re traveling. On a tight schedule, simply swiping a card or an app can be a lifesaver.

Why not to go cash-free?

You may spend more

Subconsciously people tend to think of credit cards and e-payments differently than cash. When you’re paying electronically, it’s easier to think you have access to more money, and easier to overspend. Some money-sharing or person-to-person apps also charge fees.

On the flip side, those who spend with tangible currency (like cash) find it easier to stick within spending limits. And they’re less likely to find billing surprises later.

Data can be compromised

Despite fraud protection measures, someone can still break into an online shopping site or shut down a digital wallet. Security may not completely protect against theft—Apple Pay allows customers to enter credit card information into iPhones without providing additional verification. You’ll need to be extra careful where and how you transmit your info.

Privacy concerns are another consideration

E-payments and credit cards send personal data into cyberspace. For example, you may receive targeted advertising from Google based on what you buy. And the mobile wallet Android Pay can access your search queries. Take a look at each service’s privacy policy to see what info they can access and how it’s used.

Small transactions get tricky

Some vendors still have credit card minimums or a cash-only policy. Restaurants are a good example. Local services like laundromats may require cash, too.

Depending on where you are, cash-free spending may end up being less, rather than more, convenient.

Electronic methods aren’t perfect

Your phone battery might die, leaving you without an essential spending app. A vendor’s credit card machine may be down. In those cases, and others, cash can save you in a tight spot.

Cash Alternatives

You may already be using some (or most) of these cashless payment methods. If not, here’s a rundown.

Peer-to-Peer (P2P) or money-sharing apps

P2P apps allow you to send money to another app user. These services are designed for transferring money between friends and family members (“peers”) more quickly than writing a check.

Venmo, SquareCash, PayPal, and Google Wallet are some common P2P apps. Each service works slightly differently, with its own perks and drawbacks.

Digital wallets

Digital or mobile wallets are similar to a credit card. You link the wallet to your bank account, and pay with a tap or swipe at participating retailers.

Google Wallet (also a P2P app) is one of the most well-known. Other options include Visa Pay, Apple Pay, Samsung Pay, and Android Pay. Whatever phone or credit card you’re using, there’s probably a digital wallet option that works for you.

Before using a mobile wallet, set up anti-malware software and a unique password to protect yourself from cybercrime.

Credit and debit cards

These tried and true cash alternatives offer unauthorized purchase protection and extra security, thanks to chip readers. While debit cards ensure you’ll never spend more money than you have on hand, there are good reasons to consider using a credit card if you’re disciplined enough to only charge what you can pay off each month.

Money Under 30 maintains a list of recommended credit cards for all credit levels—from just starting out to established, excellent credit.

Biometric signatures (possibly soon)

Could we use unique biological markers, like facial or fingerprint recognition, or iris scanners, for even easier transactions? Companies like IBM are researching payment via fingerprint, or Pay by Touch. Japan is already using biometric ATMs.

This method of payment would limit or eliminate identity theft (and the possibility of forgetting your card).

Summary

Going cash-free may take some adjustment, but it can work…and it just might put you on the cutting edge of the future.

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About the author

Amy Bergen Writer
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Amy Bergen is a writer and editor based in Portland, Maine. She's interested in technology, literature, and how the world will change in the future. You can reach Amy on LinkedIn, Twitter, or Facebook.