Q & A: Is “cashless” really where we want to go?
January 10th, 2008 | by rachel |
I admit it. Since debit cards have become readily accepted, I rarely have cash. I like the fact that I can use a debit card for $3.51 or $351, whatever the situation calls for. And I like NOT having to think about whether or not I need to go to the bank before I go somewhere to purchase something. I stop short, though, when I hear talk of conversion to a “cashless” society. There is something about that idea that just doesn’t feel right to me. After all, on those rare occasions when I DO have cash, shouldn’t I be able to spend it wherever I want to? Assuming it is actually possible to go “cashless”, is that really where we want to go?
Is it legal to NOT accept cash as payment for goods and services?
The Coinage Act of 1965 states that U.S. currency is legal tender and, thus, acceptable as payment for any goods and services. It does not, however, make it mandatory for businesses, organizations and/or individuals to accept that currency. Consequently, private business owners and organizations are free to adopt their own policies regarding forms of payment that they are willing to accept. That is why some businesses can opt to only accept bills of certain denominations (i.e. nothing bigger than $20, no pennies, etc.). While it may not be a great business decision, there is nothing illegal about not accepting cash as payment.
Who benefits most from plastic (debit and credit) transactions?
Certainly, consumers benefit from the convenience of debit and credit cards. They are accepted by most merchants, restaurants and retailers and they allow customers to shop without having to carry large amounts of cash. As a tool for managing budgets, debit cards are the best of both worlds – they “act” like credit cards but, like cash, are directly linked to bank accounts.
Banks and credit card issuers benefit from plastic transactions in 2 main ways. First, research shows that customers spend more when using plastic than when they pay with cash. Maybe that explains why we are bombarded with offers for credit cards and TV commercials that portray using cash as more time consuming than using plastic. Second, debit and credit card issuers charge transaction fees for merchants that accept plastic. That means each and every “plastic transaction” adds money to the accounts of the banks and credit card companies that issue them.
Ultimately, there is no way to monetize the value of the convenience of plastic. My guess is that banks and credit card issuers benefit far more from the money that flows onto their bottom lines than you and I benefit from not having to carry cash everywhere we go.
Is cash more expensive than plastic?
On its own, no. Cash is the least expensive way to get paid. It is available immediately and there are no costs associated with accepting it or using it. It becomes more expensive, though, when it is lost or stolen. In those situations, in the absence of a “paper trail”, there is no way to recover it.
Are debit transactions the same as cash transactions since the card is directly linked to a bank account?
Debit transactions are not the same as cash transactions. Nor are they intended to be. In fact, debit cards gained popularity because they of their similarity to credit card transactions. Like cash, they do immediately (or almost immediately) cause a bank account balance to go down. Otherwise, they are nothing like cash.
Which payment method is more secure?
Each and every plastic transaction carries the potential for fraud and/or ID theft. In spite of that, plastic payments tend to be more secure than cash. They create a “paper trail” and there are liability limits for debit and credit accounts. None of those elements are present with cash. This presumed “security” is the reason that government agencies and businesses often point to when going to cashless systems and policies.
Is there danger in not having access to cash?
During times of natural disasters and other unpredictable circumstances, cash is more valuable than any debit card or line of credit that may be available. What if ATMs are not working? What if banks are closed? What if credit card companies have situations that prevent them from processing and recording transactions? How would people be able to purchase food, gas, clothing and transportation? Certainly, there are backup plans and safeguards in place to prevent financial networks from being totally inoperable. There are also events like Hurricane Katrina and 9/11 that show us that, even with backup plans, disruptions to our electronic, cashless financial networks can (and do) happen.
There are some intriguing and maybe even appealing ideas surrounding the transition to a totally cashless financial structure. Never having to carry cash and not having to figure out what to do with loose change are 2 of them! In the end, I have to agree more, though, with Liz Moyer of Forbes. In her article, The Myth of the Cashless Society , she writes, “Still, there is something compelling about cold hard cash. You can count it with your hands. You can roll around in it and make origami with it. It’s the currency of choice for tooth fairies and grandparents, panhandlers, migrant laborers and off-the-books household staff.” Maybe we will be cashless…someday. Until then, I am going to do everything I can to hang on to all the cash I can get my hands on. If you are ready to convert to going cashless, let me know. I’ll be glad to take whatever cash you don’t want!