Technology is changing the way we spend our money. Apps like Venmo are becoming increasingly popular. More and more retailers are moving toward cashless pay through services like ApplePay. And many of us have our credit card information stored in apps like Uber and GrubHub. As a result, it seems as though cash becomes closer and closer to obsolescence by the day.
But what does using cash less frequently mean for how we handle our finances?
Pros of Digital Pay
Of course the biggest benefit of digital pay is the convenience factor. Paying for things has never been easier. All it takes is the push of a button or swipe of your phone. We spend less time seeking out an ATM. And not having cash on you is often not an issue. In fact, while many retailers used to be cash only, many are moving to not accepting cash at all. And paying back your friends has never been easier with cash apps.
Additionally, from a retailer standpoint, going cashless means checkout lines move more quickly and provides a more hygienic work environment for cashiers.
Another benefit of paying digitally is having digital records of what you’ve spent. Gone are the days of handwritten checkbooks. Now, it’s simple to see exactly how much you’ve spent online or with an app on your phone. This helps you keep more accurate records. Often, when we use cash, we round how much we spend because it’s more difficult to keep exact track. Having digital records allows us to see our spending down to the cent.
Drawbacks of Digital Pay
Too Easy To Spend
One of the most effective psychological tricks when trying to spend less is to use only cash. Cash allows you to experience the physical act of spending money. As a result, you’re more likely to think twice before you hand over your cash. In general, we spend less when you’re using cash. Therefore, the ease of paying for things with the push of a button can be dangerous to your financial situation. Without physically seeing your money going away, it’s much easier to spend without giving a second thought. As a result, it doesn’t take much for your spending to get out of control. This could put you on the fast track to unmanageable debt.
To avoid falling into this trap, set yourself reminders to check your spending. Whether it’s daily or a couple times a week, looking at your spending habits will help you stay on top of your finances. If you’re using mostly credit cards, make a habit of paying off everything you charge right away. This will prevent interest from piling up.
While digital pay makes it easier for you to track your spending, it makes it easier for companies to track your spending as well. Unless you’re providing your phone number or email address at checkout, cash can’t be tracked back to you. But paying digitally means companies are monitoring your every purchase. Companies then use this information to target specific ads to you. Many are wary of and uncomfortable with companies having access to all of their information. We’ve seen many instances recently of information breaches, even within big-name companies. So worrying about the privacy of your information is certainly not unfounded. Additionally, when ads are targeted to you, you are more likely to purchase what’s being advertised. This, therefore, is another way in which moving away from cash could mean you’ll be spending more overall.
While we can’t control the change in society’s use of cash, we can be aware of how it will affect us. Going cashless has many benefits, with convenience being at the top of the list. But while enjoying its convenience, it’s important to remember how it can affect your spending. Cash makes you physically feel as though you’re spending money. When that’s taken away, you may spend more recklessly. To avoid out-of-control spending, try to think of spending digitally like you think of spending cash. This will mean paying close attention to your accounts. Cashless doesn’t have to mean careless.