Discover the pros and cons of using only cash to pay for your daily living expenses.
Pros & Cons of a Cash-Only Lifestyle
Although we are increasingly moving towards a cash-free society, there still remains billions and billions of pounds worth of coins and banknotes in circulation, which suggest that many people are not ready to give up the cash just yet.
While more and more people use electronic methods to make payments such asdebit cards, credit cards and mobile payments, a sizeable amount still prefer to use cash for most of their transactions. There are a number of reasons for this and being cash-only doesn’t just mean that you are walking around with a bulging wallet or purse most of the time.
While cash-only refers to the practice of paying for products and services in cash, that does not just mean using notes and coins all the time.
The Pros of Leading a Cash-Only Lifestyle
For many, using cash for their living expenses is ideal! Here are some of the advantages of using only cash:
It’s Easier to Budget with Cash
By only spending the money you have at your disposal at any given time, you tend to be more thoughtful about what you spend your money on. Purchases are therefore planned out in advance, and you are more likely to save towards something when you know you are only going to pay cash.
You Don’t Get Into Debt as There’s No Credit
With cash-only purchases, as soon as you buy something, you own it. You don’t have to worry about repaying debts and, therefore, are much less likely to get into debt in the long run.
You Avoid Fees and Charges
While you may pay the same price for a product or service, whether you are paying cash or credit, with a cash-only purchase, you won’t have to pay the additional charges often associated with credit cards. They could be fees issued by the merchant or charges and interest levied by your bank or card provider.
Like with most things in life, there are a number of disadvantages of leading a cash-only lifestyle.
You Won’t Build up a Credit History
People who use credit cards and pay them off in good time will establish a pattern of borrowing and therefore can build up a good credit score. By going cash only, you do not have the opportunity to build up a credit history, which may limit your access to credit when you need it.
Cash Can’t be Recovered if it’s Lost or Stolen
It is unlikely that you can recover cash if you lose it, whereas a credit card anddebit cardcan be cancelled and stopped when it is lost. Even if someone manages to get your credit card or debit card and use it to make purchases, the money can be recovered by the issuer.
You Can’t Reserve Certain Things
To book things like hotels and car rental, many companies will insist that you use a credit card or debit card. This is to give them some form of security if you cause damage to a hotel room or rental car that they can recover the expenses needed to cover the damage.
They will need to make sure that you have enough of a balance on a credit card ordebit cardto cover such expenses, usually between £300-500.
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While cash-only budgeting can heighten spending awareness, it comes with inconveniences like frequent ATM trips, security risks, and missing out on card benefits, online payments, and easy tracking. Weigh the pros and cons for your financial goals.
While cash-only living can take away from efforts to build credit and can have some security issues, this method of spending can also help you save on credit card fees and interest.
Less Secure. Cash is less secure than a credit card. Unlike credit cards, if you lose physical money or have it stolen, there's no way to recover your losses.
With cash only purchases, as soon as you buy something, you own it. You don't worry about repaying debts, so you're much less likely to accumulate debt in the long run.
Physical currency isn't becoming obsolete any time soon, so it's important to weigh up your options before deciding to go fully cashless in 2024. Ensuring you can accept some cashless payments though, is essential to keeping with today's trends and customer expectations.
Using only cash has a big advantage, as Manktelow-Pimm pointed out: “When you use cash, you don't have to worry about interest charges on credit cards or loans. This can save you a lot of money in the long run.”
Some lifestyles simply cannot accommodate it, depending on your necessities. , While possible with cash, paying for utilities, electric and gas bills is also much more difficult without payment apps, credit or debit cards or a synced bank account.
If you pay a bill in cash, ask the party receiving payment to record it in their records and give you a sales receipt. The receipt should show your name, a short description of the product or service purchased, the transaction date, and the amount paid.
Cash can also be great to have on hand in case of emergencies. For example, you may find a vendor that doesn't accept credit or perhaps you have a low-limit on your credit card and, in this case, cash is a reliable back-up.
It's legal to travel with more than $10,000 in the United States and abroad. You have the right to travel with as much money as you want. However, during international travel, you need to report currency and monetary instruments in excess of $10,000.
Cash payments pose risks such as theft and loss, as physical currency can be easily stolen or misplaced. Additionally, there's a higher likelihood of human error in counting and handling cash, leading to discrepancies in financial records.
Identity theft and compromised personal information are potential dangers in a cashless economy, but privacy might be compromised in other ways too. When you pay digitally, you always leave a digital footprint, and this footprint is easily monitored by financial institutions.
Lower returns: Since cash is largely a risk-free asset, investors don't get the “risk premium” that other investments, like mutual funds or GICs, may come with. Inflation risk: While cash has no capital risk, inflation can erode its purchasing power – meaning you wouldn't be able to buy as much with it in the future.
It lowers your return on assets. It increases your cost of capital. It increases overall risk by destroying business value and can create an overly confident management team.
Probably the biggest risk of having too much cash at home is that it could be stolen, lost in a fire or even simply misplaced. Unlike some other forms of payment, cash cannot be replaced. Once it's gone, it's gone.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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