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Everything you need to know about going cashless

By Rebecca Lake
July 16, 2020

A cashless society may seem like something out of a science fiction novel but, before we know, it could slowly become reality. 

Does that mean cash could disappear entirely? Not necessarily. But as more people rely on debit cards, credit cards, and mobile walletscash could take a backseat to other payment methods. And that could come with some serious benefits.

If you’re wondering what a world without cash might look like, here’s what you need to know:

  1. What Is a Cashless Society?
  2. Do Cashless Societies Exist?
  3. Benefits of Going Cashless
  4. Are There Any Downsides to Going Cashless?
  5. How to Go Cashless

What Is a Cashless Society?

Living in a cashless society would mean that cash as we know it wouldn’t exist. No more walking around with a wallet full of paper bills or collecting loose change for a rainy day. 

Instead of relying on cash to make purchases or pay bills, a cashless society would use other payment methods, like:

  • Debit cards linked to a bank account
  • Credit cards
  • Gift cards
  • ACH or wire transfers
  • Mobile and digital wallets
  • Cryptocurrencies
  • Payment apps (think Venmo or PayPal)

Instead of handing over physical money, purchases and bill payments would all be processed electronically. And instead of depositing cash, you could add money to your bank account using electronic transfers, mobile check deposits, or direct deposit.

Do Cashless Societies Exist?

At the moment, there’s no such thing as a completely cashless society. Countries around the world still print and circulate paper money and mint coins. 

Despite the uptick in use of digital payments and debit cards, cash is still a popular way to pay. According to one study, one-third of Americans say cash is their favorite payment method. And 53% percent of Americans say they always like to carry some cash on them. 

So could a cashless society happen? Yes. But it may take time for the idea to catch on here in the U.S. 

One reason is that many Americans are either unbanked or underbanked. According to the Federal Reserve, 6% of Americans don’t have a checking account, savings account or money market account. Another 16% have bank accounts but still use alternative banking options like payday loans or check cashing services. 

Benefits of Going Cashless

Whether or not a completely cashless society will become a reality any time soon is unknown. But, in the meantime, you can take steps toward going cashless yourself. 

Here’s a look at the benefits of going cashless and why you may want to consider it: 

Benefit 1: It’s Easier to Manage Your Finances

Tracking purchases can get tricky if you aren’t keeping up with receipts or recording what you spend.

When you’re spending or making cashless payments (using a debit card, credit card, or payment app, etc) you can see where your money goes at a glance. 

Tracking your spending is a good way to budget because, when you know what and where you spend each month, you can cut out unnecessary expenses and save more money. Plus, many online payment services let you set up alerts to keep you on top of your spending. This can help you avoid running a low balance, overdrafting, or getting fees.

Benefit 2: Your Money Is Safer

Carrying cash can be problematic if your wallet is lost or stolen. If a thief makes off with your cash then you may never be able to get it back. 

Using debit cards, credit cards, and other cashless forms of payment can offer more built-in security. For example, if your credit card information is hacked and used to make unauthorized purchases and your card issuer offers a $0 fraud liability guarantee, you won’t be held responsible for any of those charges. 

Debit cards linked to a bank account are also protected under federal law. Although it’s worth noting that the amount of fraudulent purchases you are liable for may depend on how quickly you report a lost or stolen card

Benefit 3: You Can Save Time

To withdraw or deposit cash, you’ll need to spend time at an ATM, wait in line at the bank, or find a change machine if you need coins.

There are a few ways going cashless can save time. First, going cashless also makes it easier to send and receive money. If you need to pay your share of the dinner tab or split the rent with roommates, for example, you can easily send or receive electronic payments via person-to-person payment apps that link right to your bank account.

It can also make your checkout time slightly faster at the store. For example, it takes an average of one to two seconds to process a contactless transaction versus six to seven seconds for a cash payment. That means you can get in and out faster by paying with your phone or a card instead of pulling out cash and waiting for change.

Are There Any Downsides to Going Cashless?

Going completely cashless could have some potential drawbacks that you should keep in mind. The biggest disadvantages associated with going cashless include:

  • Not being able to pay at a store if the power is out or the merchant’s payment processing system is offline.
  • Potentially overspending because you’re paying with a debit or credit card instead of cash. 
  • Being charged processing fees at stores that require a minimum transaction amount to pay with a debit or credit card.
  • Not being able to purchase something if the merchant doesn’t accept forms of payment other than cash. 

These are important to keep in mind if you’re debating the benefits of going cashless and whether you should give it a try. 

How to Go Cashless

If you’re ready to experiment with cashless living, it’s good to have a bank account with a linked debit card and potentially one or more credit cards that you can use as payment. You can also look into other ways to pay, like personal payment apps or cryptocurrency.

From there, you can move on to setting up direct deposit for your paychecks and scheduling electronic bill payments. You can also tailor your spending to those stores or businesses that accept your chosen forms of payment and skip the ones that only take cash. 

Finally, keep in mind that you may still need to use cash from time to time. So it might make sense to keep a little cash on hand or, at the very least, make sure you can access your bank account through a wide network of ATMs. That way, you won’t be stuck with no way to pay if you find yourself in a cash-only situation.

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