Is cash still king? In today’s digital age, where contactless payments and mobile wallets have become the norm, it may seem like carrying cash is becoming a thing of the past. However many Americans are still using bills and coins to pay for their purchases. One in five say they prefer the minimal risk and convenience of cash, according to new research from Empower.
As a financial advisor, I always recommend at least carrying one card, but there are still several situations where cash proves to be invaluable. Let’s delve into these unexpected reasons and understand why it’s wise to carry cash with you.
In Case of Emergencies
Imagine finding yourself in the middle of a power outage or a natural disaster, where electronic payment systems are rendered useless. In these situations, having cash can be a lifesaver. Cash allows you to purchase essential items like food, water, and medical supplies when electronic means of payment are unavailable.
Cash can also serve as a backup in instances of identity theft or fraud, offering an alternative means of payment while resolving any issues that may arise.
Cash Supports Local Businesses
While many businesses now accept digital payments, there are still some smaller establishments that prefer cash transactions. Most merchants need to pay a fee to process credit card transactions, which can affect their bottom line.
Using cash helps these businesses avoid the hefty transaction fees imposed by credit card companies, allowing them to keep more of their hard-earned revenue. By carrying cash, you can support local businesses that rely on cash payments, especially street vendors, family-owned shops, and small-scale service providers. These businesses often have lower transaction fees and are more likely to pass on cost savings to their customers, making cash transactions beneficial for both parties involved.
Improved Budgeting and Spending Control
Using cash can help you better manage your finances and control impulsive spending. Physical money provides a tangible representation of our finances, making it easier to grasp the concept of money and its value.
With digital payments, it’s easy to lose track of how much money you’ve spent, as transactions are often swift and effortless. Using cash imposes a natural limit on our spending, as we can only spend what we physically possess. Unlike with digital transactions, we cannot go over budget or accumulate debt when using cash.
Paying with cash encourages us to make more conscious purchasing decisions. The act of physically handing over money makes you pause and evaluate if the item is truly worth the expense. In this way, cash can help you maintain better control over your spending and ultimately support effective budget management.
Privacy and Security Concerns
In an era where concerns about online privacy and security are on the rise, cash provides a level of anonymity that digital transactions cannot offer.
Unlike digital transactions, which leave a trail of data that can potentially be hacked or stolen, cash transactions are anonymous and do not require providing sensitive account details. Additionally, cash transactions are immune to technological glitches or system failures that can disrupt digital payment systems.
In the same Empower study mentioned earlier, 28% of respondents said they feel safer when they keep money in cash.
Tipping and Charitable Donations
Cash is still the preferred method of tipping in many industries. Restaurants, taxi drivers, barbers, and various service providers often rely on cash tips to supplement their income.
Cash tips are often received in full by the service staff without any deductions or delays. Unlike card transactions, cash doesn’t involve processing fees or reliance on third-party systems, ensuring that the full amount reaches the intended individual.
Plus, if you’re inclined to make spontaneous charitable donations, having cash readily available allows you to contribute to causes you care about, even when you don’t have access to digital platforms.
When traveling internationally, it’s essential to have cash in the local currency. While credit cards are widely accepted in popular tourist areas, many smaller businesses and local markets may only accept cash payments. Or, your card may impose foreign transaction fees that can really eat away at the cost of your trip.
Having local currency can save you from unfavorable exchange rates and transaction fees imposed by banks or currency exchange services.
Teaching Financial Responsibility
Carrying cash can be an excellent tool for teaching financial responsibility to children and young adults.
Cash provides a tangible and immediate connection between spending and money. Unlike digital transactions, which can feel abstract and detached, cash allows individuals to physically see and feel the value of their purchases.
By handling physical money, kids are more likely to be mindful of their spending and develop a deeper understanding of the concept of money. Cash also helps set clear limits and boundaries, as kids can only spend what they have in hand, avoiding the temptation to overspend or rely on credit.
The Bottom Line on Cash
There are many reasons why you should always carry cash. In a time of increasing data breaches and identity theft, cash can ensure privacy and peace of mind. Some retailers offer discounts for cash payments, enabling you to unlock exclusive savings that might not be available if you used a credit card.
So, next time you head out, consider carrying some cash with you — you never know when you may need it.
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This article originally appeared on GOBankingRates.com: Experts: 8 Surprising Reasons Why You Should Always Carry Cash