10 reasons why America should go cashless post-coronavirus — and 5 reasons why we shouldn't
Erin McDowell
- The use of cash has raised concerns in recent months due to the sanitation aspect of handing bills from person to person.
- There are advantages to using credit and debit cards even after the pandemic, including rewards benefits, easier budgeting, and avoiding ATM fees.
- However, there are also some areas where cash is still the best payment option.
You might have heard that cash is on its way out, especially as many consumers during the pandemic have chosen to use contactless or card payments over concerns of illness-causing bacteria and viruses found on paper bills.
However, when it comes to consumers' overall preferences between cash, debit, and credit outside of the pandemic, Bankrate industry analyst Ted Rossman explained that it's a pretty even race, though there are advantages and pitfalls to all of them.
"The federal reserve has found that 28% of payments are on debit cards, 26% are cash, and 23% are on credit cards," he told Business Insider. "There's still a sizeable preference for cash, especially on purchases under $10. According to the report, 49% of those purchases under $10 were in cash. It's definitely not dead yet."
However, according to new data from Square, which creates mobile payment technology, the use of cash is declining. According to the report, in 2015, consumers paid with cash for 46% of transactions under $20. In 2019, consumers paid with cash for only 37% of transactions under $20.
Here are 10 reasons why America should go cashless post-coronavirus — and five reasons why we shouldn't.
Cash can be more likely to carry illness-causing bacteria and viruses than credit or debit cards.
Cash can be passed around from person to person much more frequently than your personal credit or debit card, making it potentially more likely to carry illness-causing bacteria or viruses like the coronavirus.
The CDC suggests you clean and disinfect anything you touch a lot, like a credit or debit card, by using a regular cleaning spray or wipe. The WHO has also told Business Insider that people should wash their hands after handling cash, especially before eating.
However, it may also be wise to limit your use of cash in order to prevent yourself from getting other illnesses even after the pandemic.
"Fecal bacteria and other pathogens may have hitched a ride from someone's hands, nose, or apron onto our cash. And yeast or mold might have taken hold, too," says a report from Scientific American. "Lower-denomination bills are used more often, so studies suggest our ones, fives, and tens are more likely to be teeming with disease-causing bacteria."
Not only is using a card potentially safer, but it's also a lot quicker with the introduction of contactless payment.
The WHO also recommended to The Telegraph that contactless payments are the safest method during the coronavirus pandemic.
"Mastercard says that 51% of Americans paid with a tap in March or April," Bankrate industry analyst Ted Rossman told Business Insider. "About half of those, so roughly a quarter of US adults, were first-time users of contactless technology. Their explanation behind that was a lot to do with the fear of germs from using cash or touching a payment terminal. [The pandemic] has really accelerated the use of this technology, probably by years."
It can also be a quicker and more convenient option for users.
"Contactless payment is faster than paying in cash, or even dipping a card into a machine and waiting," Rossman explained. "This makes sense in certain situations, like taking the subway. Being able to tap your phone or your card makes it much faster to go through the terminal. In a fast-food restaurant or other quick stop, advocates would say it's faster, but not as life-changing as it would be in public transit, once that returns after the pandemic."
Credit and debit cards make it easier to track and control your spending.
When using a credit or debit card, you can easily see when and what you spent money on throughout the month, making it easier to cut back in certain areas.
"Having a bank account means everything is written down, so you can go back and see where your money goes," Rossman said.
Some budgeting tools also automatically split up your purchases into categories like eating out, groceries, online shopping, and more, as well as tracking your savings habits.
Unless you're diligent about saving your receipts and counting how much cash is in your wallet, it can be relatively easy to lose track of how much money you're spending without that paper trail.
"Cash might help you avoid overspending in the moment, but you have to know yourself. Sometimes when people pay cash, they don't know where it goes. You pay cash for coffee or breakfast or running errands, and then at the end of the day don't know where all the money in their wallet went," Rossman said.
Using a card can wipe out the risk of being shortchanged.
Most Americans can recall being shortchanged at least once or twice while using cash — it can be surprisingly easy for cashiers to short you a couple of dollars or even more. Using a debit or credit card avoids this problem altogether.
Credit cards can help you build your credit score and help with things like buying or leasing a car, getting an apartment, and other necessary purchases.
Having a good credit score is oftentimes necessary when it comes to moving apartments, leasing a new car, and taking out a loan. Keeping on top of credit card bills is one surefire way to raise your score.
If you're more likely to use cash on your purchases, this will have no impact — positive or negative — on your credit score.
Another advantage of using a credit card is gaining access to certain rewards.
"Debit card rewards are minimal, but for people who use credit cards and pay the bills off right away and avoid interest, that can rack up a sizeable amount of money if you play the game right," Rossman said.
"Whether it's cash-back or travel rewards, and depending on how much effort you put in and how much you spend, some people can earn hundreds or even thousands of dollars worth of rewards. Using cash means you're losing out on those rewards."
"With credit cards, you can also qualify for things like purchase protection in the case of theft or accidental damage," Rossman explained. "Extended warranties are another pro for credit cards."
It can also be easier to grow your savings with a bank account, rather than putting away physical cash.
While some people prefer the piggy-bank method, it can be easier to put away larger sums of money using a bank account, rather than the odd $5 or $10 here and there.
"If you have a biweekly direct deposit, you can siphon off some of that income to go directly into a savings account," Rossman said.
Online purchases usually require a debit or credit card number.
Online purchases have seen a huge increase as a result of the coronavirus pandemic, and that momentum will likely continue even after in-store shopping restrictions are lifted.
Online purchases, more often than not, require a credit card, debit card, or bank account number, rather than cash.
Credit and debit cards can be easily replaced, but lost or stolen cash is usually lost forever.
It's a relatively seamless process to replace a lost or stolen credit card or debit card, and most banks will work with you to get back any stolen funds.
"Credit cards have better fraud protection policies than debit cards, and they both have better fraud protections than cash," Rossman said.
However, if your wallet gets stolen with cash in it, it can be much harder or virtually impossible to replace that money, unless the wallet is retrieved.
"With cash, if it gets lost or stolen, it's gone," Rossman said. "With credit, there's a lot more protection for fraud and even disputing legitimate purchases. Especially as of late with recons for canceled events or trips, a credit card can help you out."
Hefty ATM fees can make using cash expensive.
While banks can have a monthly service charge, ATM fees can add up if you're constantly taking out cash from non-network ATMs. Non-network ATM fees — AKA, taking out cash from any ATM that's not operated by your bank — can be anywhere between $2 and $3.
Non-bank, independent ATMs can charge even more — up to $10 in some cases.
However, despite the potential advantages of owning a credit or debit card, not everyone has or uses a bank account.
According to a report by the FDIC, 25% of Americans were unbanked or underbanked in 2017.
"There's been a big movement recently towards cashless stores," Rossman said. "Some cities like New York, San Francisco, and Philadelphia, and even whole states like New Jersey and Massachusetts have banned cashless stores. The argument is that it shuts people out.
"There is a school of thought that if you're excluding the use of cash in your stores, you're turning off a sizeable portion of the population."
Only using cash can help prevent you from going into credit card debt.
"There's been a huge rise in envelope budgeting — once that envelope of money of cash is out, you're done," Rossman said.
Rossman said that while this method may definitely work for some, having a physical bank statement to track what you're spending and where you're spending it can be a useful practice for not going into debt.
"Responsible credit card use is possible, especially if you're paying bills on time, avoiding interest, and taking advantage of the rewards," he said.
Bank accounts can be hacked, resulting in a loss of money or a breach of private information.
"With debit cards, there's a direct link to your checking account. If there's any sort of fraud, even though you should get the money back eventually, you're still missing your money for a period of time," Rossman said. "It can take weeks to get that money back."
Identity theft is also a concern when it comes to using credit or debit cards. According to a report by Javelin, roughly 6% of consumers became victims of identity fraud, or one in 15 people, in 2017.
Not everywhere accepts credit or debit cards as a form of payment.
Some small businesses operate on a cash-only basis to avoid processing fees.
"Businesses feel that — when customers use a credit card, the average processing fee is around 2%. It's a lot lower for debit purchases, around .03%," Rossman said. "Especially for credit cards, processing them can be expensive."
Many other businesses require customers to reach a certain limit before they're allowed to use a credit or debit card.
"Consumers generally like payment choice. Some studies show that people spend more when they use a card because there's less friction or less physical pain of parting with your hard-earned money," Rossman explained. "However, cash is finite. If you don't have it on you, that can make or break a sale."
Tipping is one area where cash is still king.
"Most times you're tipping, whether it's a bellhop at a hotel or a barber or hairdresser, businesses don't want to pay the processing fee on tips," Rossman said.
"There are a lot of tipping examples that take place in cash. That's one reason I think we're unlikely to move towards a truly cashless society anytime soon."
- Read more:
- The best credit cards, whether you want travel rewards, cash back, or an intro APR offer
- 4 ways your credit card can help when money is tight, from cash back to point redemptions on Amazon
- 4 reasons why you should use a credit card instead of a debit card
- How to figure out if you should use credit, debit, or cash
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