How Much Cash Do You Use?

In a recent podcast, Crown Financial Ministries talked about a cashless society and how we'll soon view using cash as unusual. They commented:

Visa Europe's CEO has predicted a cashless society by 2012 because the cost of handling cash is higher. The efficiency of technology is part of what’s driving the change, the speed of the electronic transaction over human hands. The convenience of it also drives it forward, just like online banking. There is a goal is to have a cashless Olympics in 2012, using a major event to show it can be done.

Well, 2012 may be a little aggressive (it was a prediction made in 2007), but Crown agreed that cash would be phased out over the next ten years (they think the recession might have slowed down the move to a cashless society since more people are using more cash right now.) That by then people would be using debit and credit cards (and maybe checks) with no cash transactions.

I was thinking this was crazy-talk until I stopped to think how much I actually use cash. Other than gifts for kids' birthday parties and very small purchases (under $10), I don't use cash at all. I either charge everything (mostly) and pay it off when due or write a check. And check writing is even becoming less and less common as more accounts are online and connected and more places accept credit cards. So after I thought about it, I can see how a cashless society in ten years is not that far-fetched.

How about you? Anyone out there think that a cashless society in 10 years is likely? How much cash do you use these days anyway?

Comments

[otc]

Cashless could be nice, but a lot of issues about taking you money ie taxes etc....gov'ts like prefer tax removal so you dont realize how much your actually giving gov't. When compared to actually paying out the money to them.

[Rzrshrp]

A cashless society would be generally more convenient but I think that processing fees will always make this a challenge. There are still plenty of businesses that either don't accept cards at all or only accept them over certain amounts (probably against their agreement) because the fees eat into their pockets so much.

[BigBoy]

I usually have about $100 in my wallet, and I always take a few hundred when I travel. This is just used for grabbing a quick bite, give to my daughter or my wife it is always nice to have some pocket change.

[Marc]

I haven't taken any money out since December 17. That was only $40. I can't foresee taking any money out this month either. Everybody takes debit or credit, so I don't usually have cash - it also helps to keep track of spending.

[Ryan]

I rarely use cash. Only for places like high school basketball games do I use cash. Everything else is done via debit card, soon to be credit card when I turn 18. I actually think checks themselves will be phased out before cash. Cash allows for anonymity.

[Brent]

speaking of cash, I have a dilemma of my own on what to pay off first. My wife and I are paying on a student loan that was for her schooling and is in her father's name. The balance on this loan is $19,000 @ an interest rate of 6.875%.

We have a car loan in our names with a balance of $21,000 @ an interest rate of 4.89%.

We are going to be able to pay off one or the other this year, which one would you pay off first with your cash you have waiting in the bank?

The student loan is obviously at a higher interest rate but its not in our names, my thinking is to pay off the auto loan to clear it off our credit score and in case anything was to happen to our income, we would not have this to pay recurringly.

Any thoughts? I cannot decide which option to follow

[Terry]

Perhaps mainstream society will become cashless, but I don't see cashlessness (is that a word? spell checker thinks not) reaching the underclass any time (or is it anytime?) soon.

[ryan]

It would only be possible to go cashless if everything you ever spent money on was from a store.

No person off craigslist would accept a personal check for a lawnmower.

But there is far too large of a black market to ever do away with cash. That and people spending unreported income.

[pen]

i like paying cash for small transactions. besides, the anoymity is nice. I think cash will stay around, just be less common.

[JH]

We used to be "cashless", but went to carrying cash for budget categories that were difficult to control. We now use cash exclusively for grocery and personal items, entertainment (including eating out, movies, bowling, etc.), and clothing. Mission accomplished -- all three of those categories were under budget for 2009!

[Crystal]

I would love to have a cashless society if there was an easy way for individuals to take credit (like Craigslist sellers) and there was a backup system if the electricity went out.

During Ike, a bunch of places were cash only - no power meant no card readers.

Right now, cash is still needed for situations like that.

[SAHM]

I have to agree with Ryan- there is too large of a "black market" to do away with cash. I would have agreed that we'd have a cashless society fairly quickly until I got to thinking about what I use for cash and/or checks. I see checks being obsolete before cash. I pay my kids tutors, babysitters, and buy stuff used (craigslist, etc) using cash. We also use cash to help keep our budget under control (like JH said). The fees would be difficult to overcome because then everyone would have to take some form of debit or credit cards. Even paypal has started charging fees on personal accounts.

[MC]

I use cash to pay my kids' allowance, my housecleaner (she insists), and to buy food from the company cafeteria (my lunch most days, and the occasional treats for my workgroup).

Do you consider checks=cash? I write personal checks only at Sam's club (they won't take credit cards) and to pay my babysitter. Also the occasional tradesman who comes to the house to repair something. When I bought a new car a couple of years ago, Honda wouldn't take a credit card for the full amount so I wrote them a check (darn, I was hoping to get a huge cash-back bonus on that!). And when I had some remodeling done in my home, the contractors all refused my credit card and asked for checks instead.

I wish cash would disappear. It's harder to figure out where it goes, and I hate carrying change.

[MC]

Brent: I think you should always pay off the highest interest rate loan first--ie your student loan.

If you can't pay your car payments, you can always sell your car and buy a used car instead. And if you have to declare bankruptcy, you still have to pay your student loan.

[Brent]

MC - the issue I have is that the student loans are in my father in-laws name and not ours. We obviously plan to pay the loan since my wife incurred the charges but I don't know which to pay off first.

I guess in an emergency, it would better to not have loans out in our name...

[Paul]

Just last week, I bought my son a used car with a bundle of Benjamins... most money I ever carried on me. Having the cash in hand made my negotiation so much better. The seller was salivating over the cash, and reduced the price by 12%. I think the psychological effect of seeing the $100 bills was more powerful than using a check or debit card.

[Jim]

I don't use cash all that much myself. Its probably 1-5% of my total spending.

I don't think we'll hit a truely cashless society anytime soon. There are still a large amount of transactions via cash. Many people don't have checking/savings accounts at all and cash their paycheck every week.

[Bobbert]

We used $3 cash in January. The parking garage at the children's museum didn't take cards.

Cashless doesn't just mean cards or check though!
We spent $2500 through electronic transfers (via ING) last month.

[billyjobob]

I use my debit for almost everything. I do carry 1 or 2 hundred in my wallet, for small purchaces or...just in case I need cash and the ATM isn't available. I agree with Ryan about the money thing. We won't see a cashless society in our lifetime. Simply because of the black market and that sort of stuff that was mentioned. People sometimes want to spend cash so their purchases can't be tracked as it could be with a debit or credit card.

[Apex]

It depends on what you mean by cashless. True cashless means the government no longer prints or backs actual physical bills and coins. I don't believe this will happen anytime in our lifetime.

As to being cashless in practice, it will continue to get slowly more and more cashless over time but even in 10 years it won't be a whole lot different than today (and certainly not by 2012). Already 95% or more of transactions certainly are done with check or card. Yes I made that number up but if you think about all the money you make each year and then add up how much you spend using cash I bet its way less than 5%. The difference in usage from here will be just small amounts around the margin.

If you recall back in the 90s the only TVs sold by 2000 would be HDTV, the government would shut down analog signal by 2000 (later pushed to 2003, and then early 2009 and then finally mid 2009) and all stations would broadcast exclusively in that. Here we are 10 years later, the govt finally shut down analog (10 years after predicted), Almost all new TVs are now digital but they are not all HDTV yet and certainly not all stations broadcast in HDTV. 10 years from now they still probably won't all broadcast HDTV. People who make predictions about how soon things will advance almost always predict on the short end.

Another example is the paperless society or office. We were supposed to be there a long time ago by predictions. Anyone have a paperless office? Printers and copy machines are everywhere. More things are electronic, but people still want their paper and will for many decades to come. We are a long long way from paperless and cashless.

[Eugene Krabs]

Although I almost never carry and use cash, earlier today, I did use cash to pay for stamps to mail something out.

A week or so, I was at a restaurant, and none of my cards worked. It was eventually determined that their system had gone haywire, and a reboot fixed it. But as I was waiting, it occurred to me that cash could have been a real handy back-up.

I don't think that the world will or even should turn into a cashless society. There are still some inherent strengths of cash that I don't think plastic will ever displace. However, it is possible that our society could become Mostly Cashless.

[Crystal]

@Brent
Pay off the student loan first. You save the extra interest and can roll the bigger payments towards the other loan afterwards...both loans can be paid off in a year and a half.

Plus, I hate owing people money even more than I hate owing businesses/banks money.

Your father-in-law was nice enough to put his name on someone else's debt, be nice enough to give him peace of mind.

[Tyler]

I try to use cash most of the time. I've said it before, but be careful of the tracking ability of always using a card.

I am not some paranoid freak, but your financial records are the first thing I am going to request if there is any legal dispute. Why provide any additional ammo? At least throw a wrench into the discovery by using cash some of the time.

I know multiple people who in hindsight wished they had used more cash.

[KaseyD]

Brent:

I agree with MC, pay the student loan off first. (1) it's the higher interest rate loan (2) either way you own the money (3) paying the loan monthly is just as good, if not better, for your credit score than paying off the loan and (4) you get points with your father-in-law.

If you can't bring yourself to pay off the student loans first, start saving more money so you can pay off both loans at the same time. Put your money into a series of CD's scheduled to mature in increments that will allow you to satisfy the debts. You should be able to find a 1.5-2% rate which would help equalized the interest on the loans.

In any event, you should always have an emergency fund - plan to to be able to cover at least 6 month's of expenses. More if you think the "emergency" is inevitable, such as your jobs are at risk.

[Dan]

Just wait until we move away from even carrying credit cards. Soon enough you'll just wave your cell phone near the card reader and it'll be linking to your credit card. In Africa and Iraq, they even can make payments from one phone to another phone.

[Brent]

Thanks for the tips, I think I may just do what Kasey suggested

[RetirementInvestingToday]

I use the least amount of cash possible however I only do this for one reason. That reason is that I have an American Express card which gives me cash back on every purchase I make.

[Sarah]

I use cash for almost everything! I've found it helps me stay on budget better and I have more psychological connection to my money. I RARELY use my card!

[cmadler]

The CEO of VISA Europe would obviously love a cashless society, but I don't see it happening. A number of businesses I patronize have cash-only policies. No, not those kind of businesses. ;-) My barber, for example. Local restaurants. Not to mention yard sale shopping, Craigslist, and the like. Checks are probably on the way out, but cash will be around for quite a while yet.

[Sarah N.]

I suspect that the experiences of the subset of people who read financial blogs might not be a good representation of the population as a whole.

As Jim and Terry noted, there are a lot of folks who don't even use the banking system, much less debit and credit cards.

I don't think cash (in some form) will ever really go away.

[Claire]

Brent - I think you should pay the student loan. It's money you got because someone else was nice enough to put up their credit for your wife. You should pay that off first because then there will never be any money issues amongst family. Also, it's the smallest loan at the higest interest rate.

In terms of cash...I rarely use it. Sometimes to get gas at the ARCO's. I also rarely write checks - though I do have the bank write checks for me through online banking. I pay for everything I can on my credit card, then pay it off in full every month. The only place I use my debit card it Costco.

[Peter]

Just remember that Crown Ministries also stated that paying by Credit or Debit Card that individuals on avg spend an additional 10-15% extra because it not real cash exhanging hands. There is a mental diffence between parting with a $100 dollar bill vs swiping a card for the same amount.
I like the convenience however it would assist a lot of people from over spending if they used cash only. If you have no cash then you should not purchase the item.

[Crystal]

I've heard that credit cards lead you to spend more, but for me it's the other way around. The cash seems to just disappear and I can blow it off as a charge I will never have to see again. With my credit card, I remember the balances I signed for and am forced to see them again when I check my credit card bill.

[rxjohnk]

@Brent-

Are you a homeowner? would you have the ability to refinance both of the loans into a home equity loan? You could probably get something in the neighborhood of 5%, which after the tax benefit would be a net of around 3-4%.

Paying these loans off may *feel* good, but you are likely in a better position by saving up any cash you have and making minimum payments on these notes, regardless of whether your refinance them into a deductible home loan.

best wishes.

[Linzerella]

I only began using cash in earnest in December 2009. After paying off $31,000 in consumer debt in just nine months, my husband and I wanted a method to track our variable expenses to ensure we don't end up in the same situation.

We use cash for variables - spending money, food, miscellaneous (cat food and litter, gas, personal care items, sporting activities, etc.) Essentially, anything that's not automated falls under our cash area.

We withdraw amounts for each of the three categories, and track our purchases in our "Budget Binder" - keeping our cash in jars until we're ready to use it.

We learned this method from Gail Vaz-Oxlade in "Til Debt do us Part." Her method has shown us that when we use cash, we're much more conscious of how much we're spending. Seeing cash for us makes us realize the "pain of purchasing" and how we can be more aware of where our money goes.

So for us, a cashless society would not work! :)

[BD]

I use cash for small purchases usually. Credit card is used for larger purchases/business expenses and paid off each month. Personally, I like cash for some things, so I wouldn't want to go entirely cashless.

[Holly S]

Personally, I doubt I will ever go totally cashless. I take $x monthly for my entertainment/eating out budget. I take $x weekly for my gorceries/household supplies. I take $x for my poersonal allowance (clothes, manicures, gas, pedicures, haircuts...)

this is my persnal way to control my budget.

[Old Limey]

So far this year I have spent $1.95 in cash and that was for a cup of coffee when we had some spare time at the end of last Monday's 'Hike for Health' class and we were waiting around for the bus to arrive for the trip home. I could have used a credit card but I don't feel comfortable using one for such a small purchase. I put everything I possibly can, including utility bills, on a credit card in order to obtain the cash rewards, which add up to quite a bit over the course of a year. I get 3% on gas and restaurants, 2% on Travel and everything else, and if they won't take AMEX I get 1.5% on M/C.
If you don't use credit cards because you lack self control that's something that needs to be worked on ASAP if you want to maximize your savings. It's actually dumb to use cash these days for anything where a credit card will do.

[LiveCheap]

It would be a shame. Having dead Presidents in your pocket makes you think much more about what you are spending. Money starts becoming a theoretical when you have direct deposit and debit/credit. You also have the cash discount factor. My wife and I have gone on several credit-free diets where we would take out a sizeable amount of money from the ATM on Sunday that would pay for everything in the coming week. We always had money leftover and it dramatically reduced our expenditures. I once went to buy furniture with cash and it was crazy what they would do to get $1,500 in cold cash.

Today, with the issues with Credit cards, we are seeing a resurgence of cash use. By the way, the banks want you to use debit cards because they found out that for people who don't have a lot of cash in their account, they are far, far more profitable than credit cards without the pesky risk of actually lending anyone money ($35 overdraft fees for a $2 cup of coffee and 5 of them in a day...).

Checks are going the way of the dinosaur, but I think cash will be around for a very long time.

[MasterPo]

Cash talks!

Call it assistance, gratuity, consideration, premium - whatever. A green-back in hand gets you much further and faster than a debit card. Let's be realistic.

Also, don't over look the GROSS *intrusion* into your private life (as if that isn't already happening!) by the government!

WHen every single transaction you make is logged it's soooooo easy to profile a person for punative taxation, fees, fines, catagorizing etc.

[Ace of Wealth]

Unfortunately it seems like cash isn't going anywhere. But I hardly use cash if at all. The only time that I use cash is when I go to certain restaurants that require cash transactions. Otherwise It's credit card all the way.

[Mike Hunt]

When living in the US it seems like I hardly used cash much for anything- mostly just for paying to split the bill when going out with friends or buying booze at the bar.

Since I've moved to Asia I've found that people use cash WAY more often. I mean like people showing up with cash to buy a $50K car or even a house! You can imagine several suitcases of banknotes since the largest bill here is about $30 USD. It's not uncommon at all.

At weddings here there is a big show of setting up a dowry of banknotes and gold- often the total is above $20K and that's all laid out in cash, nicely stacked and artfully displayed, of course.

Cash in hand is the way to go.

At home I keep about $10K or more as cash on hand in different currencies of where I travel (USD, local currency, Euro, GBP, Malaysian ringitt, Chinese Yuan, Singapore dollars, Australian dollars, Korean Won, Japanese Yen). Whenever a particular currency gets very strong I will exchange it for a local currency and vice versa- it's a fun little habit that keeps me entertained from time to time and comes in handy when I know I will have to travel. For example, this year we will go to Australia, Europe (Euro plus Swiss Frank) and the US for vacations so I've got my eye on converting those currencies in the near term.

-Mike

[mgs]

Brent, most people here suggest you to pay off student loan first, but I don't. At least, I am not that sure. Although it has higher rate, its interest is tax deductible. If your father in law's federal tax bracket is 25%, and you state tax bracket is 5%, the 6.875% student loan is same as a 4.8125% auto loan for interest you have to pay.
Also, I would guess your father in law's financial status is more stable than yours, and he may not need much of credit like you and your wife. For example, he may have a house now and you two are just going to buy one soon...
So, do not pay off student loan first just because its rate is higher. You also need to think about tax and who needs more credit.

[Cat]

I use cash all the time. I continually buy fruits and vegetables at fruit stands and farmer's markets. I used to use debit cards a lot but I find writing checks and plugging in the amts. in the check registry at every store keeps me honest and always aware of just how much I am spending at all times. Takes more time and responsibility.

[A Girl and A Boy who love each other.]

I write one check a month for our HOA fees.
In all of 2010 we took out only 325 dollars for different things.
I use my amex for everything and make it off at the end of each month.

[MikeS]

The only thing I pay cash for is my haircut every month. Everything else is done electronically. I don't even have a check book anymore to write a paper check (ING Direct). For me, I find that if I have cash, it tends to disappear because I spend it too freely, so I try and limit the cash I carry.

[Rich Avery]

For work, I use a company credit card. For budgeted stuff like groceries and gas I use debit. I use cash pretty much just for my own personal spending money (for lunches) and for family activities. I take out a pre-determined amount of cash each pay period so we don't overspend.