Do you know why cash is better than card? If you are in the ATM business, then you probably have your reasons, the number one reason being revenue…. But with the advancements in electronic payment technology, money transfer apps, and cryptocurrency, some might start to wonder whether cash will become obsolete.
We’re here to tell you that cash is here to stay. Not only are there a number of situations and scenarios where cash is the only possible form of payment, there are also clear benefits of using cash instead of a debit or credit card.
Trust us. Cash is king. Here are 7 reasons why cash is better than card.
1. Minimize Debt
As you probably already know, credit is a quick way to accumulate debt. It’s the very nature of credit: buy now, pay later. Charging more than what you have or what you make results in debt. And it’s a very easy habit to develop. When you pay with cash, however, you own rather than owe.
Paying with cash has also been proven to help with budgeting. Budgeting, in turn, prevents debt. Budgeting ensures that you only spend what is available. Therefore, budgeting is made easier with cash payments. You see and feel the money leave your pocket. When it’s gone, it’s gone.
A budget is much harder to maintain when the debit or charge is so far removed. Ever heard the phrase, “Out of sight, out of mind”? Unfortunately, for many people that’s what happens when they pay with their cards. And this is what makes budgeting so much more difficult.
2. Avoid Interest
Then, as though charging more than what you have or can afford wasn’t enough to burst your budget, you accrue interest on your card payments. In this way, you end up paying more for your purchases when you pay with a card than if you had paid with cash.
Of course, you don’t accrue interest if you pay the balance each month. But many people occasionally miss payments. Not only do you end up paying more in interest and late fees, but your credit score could be at risk, too. With more cash payments, these problems become less of a concern.
3. Avoid Overdraft Fees
While it might seem clear or even obvious why cash is better than card when it comes to credit, it does have its place above debit as well. First of all, the same “Out of sight, out of mind” maxim applies. It is much harder to stick to a budget when you don’t actually see or feel the funds leave your wallet.
Second, your debit payments don’t accrue interest, but have you ever miscalculated your balance and been charged an overdraft fee? There’s $20 you’ll never see again…. Alternatively, depending on your bank, you can only get cash if your available balance will support it.
Once you have the cash, you can spend it until it’s gone without suffering overdraft penalties! You always know how much you have at any given time without the confusion of “pending” transactions, “available” balance, or delayed processing.
Unless you want to keep a register, like we did when checks were more commonplace (Does anyone miss checkbooks?), it might be best to use cash as much as possible rather than rely on debit transactions. Especially if you are trying to maintain a strict budget and decrease your debt.
4. Avoid Transaction Fees
Did you know that it costs money to process card transactions? Yes, there are network fees charged by your card company to process, or allow, your transactions.
Many businesses adjust the cost of their goods and services to account for the amount these fees will cost them to process card payments. But there are some businesses (typically small businesses, pop-up shops, freelancers, etc.) that pass this fee on to the consumer. And some restaurants pass this cost onto their servers and deduct card transaction fees from their tips!
Maybe a 3% payment transaction fee doesn’t discourage you from the convenience of making an electronic payment rather than a cash payment. But think of it this way:
You use a card to pay for a $50 restaurant tab. That $50 is now worth only $48.50 when you subtract the transaction fee. Whereas if you pay for your meal with a $50 bill, that $50 bill retains its value whether it’s used for groceries, a haircut, or a movie by the next person.
So after, say, thirty card transactions, that $50 will end up being only $5. The other $45 becomes property of the bank after all of the digital transaction fees are paid…. Is that where you want your money to go?
5. Spend Less
Psychologically, we spend less when we use cash instead of card. It doesn’t “hurt” as much when we spend without our means if we don’t immediately experience the effects. In other words, the option and/or ability to postpone the consequences of our spending money we don’t currently have results in overspending.
For this same reason, you are more likely to encounter deals when you are able to pay in cash. Individuals, small businesses, and, well, basically anyone, prefer cash payments to electronic payments.
First of all, they don’t have to worry about missed payments. Sometimes it’s more important to a seller that they get full payment immediately than have to deal with defaulted or delayed payments.
Secondly, when someone receives a cash payment, again, they benefit from the entire value of the banknote. The alternative is either having to deduct a percent of a card payment or risk missed payments. Therefore, since most people would rather have the security of full payment up front, they are more likely to offer you a sale for less than the ticket price if you have cash.
Often the “ticket price” accounts for the cost of waiting for a fulfilled payment and any associated fees. So when you pay with cash, you not only avoid paying interest, but you might also benefit from paying less up front due to the convenience afforded to the seller.
6. Decrease Risk of Identity Theft
Have you ever received an email saying your information was compromised in a data breach? When you swipe your card, credit or debit, you put yourself at risk of being robbed.
When you swipe your card or use it online, your card data can become compromised if there is a lapse in security. This risk applies to money transfer apps tied to your accounts as well.
On the other hand, there is no paper trail with cash. So when you make cash payments, your personal information remains secure no matter what.
7. Pay for Almost Anything
Finally, cash is universal. You tip your server, bartender, barber, or manicurist in cash. You give a dollar or two to the beggar on the corner. Your kids get their allowance in cash. You pay your young neighbor in cash to babysit. The local farmer’s market or pop-up exchanges goods for cash.
Most cannabis dispensaries are cash only still, too. And with the recent change in money transfer app taxable income reporting, you might start to find even more freelancers, independent contractors, and other self-employed individuals encouraging cash payments.
Cash is almost always accepted. You will find more “Cash Only” signs than you will “Card Only” signs. Since cash retains its value while the bank shares in electronic transactions, some businesses just don’t want to pay those transaction fees. And what happens when “the system is down”? You pay with good old fashioned cash!
Most importantly, everyone has access to cash. Minors, low-income, and other unbanked individuals would find it quite difficult to fit into a cashless society. Cash is non-discriminatory and is absolutely necessary in today’s world.
Why Cash is Better Than Card
Now, we know that alternative payment methods definitely have their place. But we also know that because of the benefits cash offers, it won’t become obsolete anytime soon.
Cash is traditional and familiar. It’s reliable. It’s universal. And it’s better than plastic.
Now that you know why cash is better than card, are you convinced that an ATM business is a solid investment? Contact us to get started today!