Think about this for a second. We live in a mostly cashless society. More and more people every day use their phones or plastic cards to pay for items and are transferring away from cash. A large study, published by the World Economic Forum, showed that consumers made a total of 417 billion cashless payments in 2014, up from 311 billion transactions, or a third, just four years earlier. Another separate study showed that 9% of people preferred to use cash. 78% of those surveyed, in contrast, preferred to pay for things with a credit or debit card.
Since the 1950’s society has been pushing towards cashless payments, and today, the switch is unconscious. There’s no doubt that cashless is quicker and easier to buy what you want, with the push of a button, scan of a thumb or swipe of a card, you now own a new item. But, is all this progress actually good?
No, not for people who can’t control their spending habits. In fact, here are five major reasons why you may want to cut the cards and go back to the traditional way of purchasing.
1) You Waste More Money With Cashless Payments
It’s a proven fact. In a research paper published in 2008, Mr. Raghubir & Srivastava wrote that there are significant differences in payment types. “The more transparent the payment outflow, the greater the aversion to spending or higher the ‘pain of paying’. Less transparent payment modes such as credit cards and gift cards (vs. cash) being more easily spent or treated as play or ‘monopoly money,’” they wrote. Its a simple and true statement that paying in cash is much harder than paying with a card, especially when its something you know that you don’t actually need.
2) Because Of Less ‘Pain Of Paying’ And Easier Purchases, Consumers Purchase Products Impulsively
A study published in the Journal Of Consumer Research pretty much reiterated what the above section said. “The pain of paying in cash can curb impulsive urges to purchase such unhealthy food products. Credit card payments, in contrast, are relatively painless and weaken impulse control. Consequently, consumers are more likely to buy unhealthy food products when they pay by credit card than when they pay in cash.” Think back to your personal purchasing impulses, and you can probably relate to these findings. When walking through a section of a store designed for impulse purchasing, you want to buy something, and because of the ease and painlessness of purchasing, you probably do. My personal justification used to be; “these Skittles are only $2. I could easily buy them. They taste good. Oh, I can use Apple Pay now? Sold.” Now, I use the ‘money in the pocket mindest’, where everything I don’t buy is money in my pocket. Without a cardless method of payment, I’d probably reconsider my purchase, asking ‘do I really need this?
3) The Cash You Carry Is The Only Money You Have
I carry a $50 bill in my wallet and some quarters. Because I never spend any money, it suites me perfectly. It will buy me a dinner if needed. If needed, I can split it, and use it throughout a day. It will get me a ride home. But, it is only $50, and when I run out, I run out. Because of this, I am inclined to never spend it, unless there’s an emergency, or something unexpected. With only one bill of cash and no card, you are still fairly secure but will have a tougher time spending your money. Previously, I removed Apple Pay from my phone, but now that I am more disciplined with my spending habits, I’ve reinstated it for emergency use (like an Uber).
4) With Big Purchases, Cash Will Save You Money
I follow the David Ramsey mindset, when it comes to personal big purchases, like a car. Don’t buy what you can’t afford. Let’s use the car example. If you buy a car in all cash, it is yours when you drive it away. You never need to pay interest or monthly car payments for a rapidly depreciating asset. You won’t be like my friends who own 6-year-old cars that are falling apart but are still paying an inescapable $100 a month on them. Because you don’t have a loan, you won’t have interest, so you will actually save money, and you won’t have the strain of paying off the loan. (This differs for investments, like homes and businesses because debt can actually help you in many ways, but that is a blog post for another day.)
5) It’s Simpler In Many Ways
In many ways, it’s the easiest way to pay. Have to buy something offline, like a local service? Chances are cash will be the quickest and easiest way to buy it. Also, when using cash it is easier to follow a budget, easier to buy girl scout cookies (it’s not an impulse buy, it’s for charity 🙂 ) and won’t incur a monthly fee or overdraft threat.
Try leaving your cards at home for a week and only carry cash. I think that you will be surprised at how much more aware you are on your spending habit, and how much money you end up saving.