Is it time to go back to cash?
We used to keep our bank cards for big spends. These days, we flash the plastic for the smallest of purchases. But could this be bad news for our finances?
With more and more of us spending money with the wave of a card, a rethink may be in order
How much money have you got in your purse right now? The latest research has found that almost half of us carry less than £5 around with us, with Barclaycard reporting that 70% of people are now using contactless cards for purchases under £30. And it’s not surprising: why fumble for notes and coins when you can simply ‘wave and pay’ with contactless?
But there’s emerging evidence that suggests our overreliance on cards may not be good for our bank balances. Studies have found we spend more freely with cards than with cash, which might be why two out of every five retailers plan to be cash-free in the next five years. Psychologists have also found a fascinating curveball: spending cash can feel painful, which puts us off using it.
‘Handing over physical money can feel more tangible and “hurt” more than swiping a card,’ says finance expert Jasmine Birtles (moneymagpie.com). ‘With plastic, you swipe and don’t think much about it – it’s almost as if you’re not spending real money.’
Paying with cards isn’t inevitably painfree, of course. If you’re not careful, you can lose track of what you’re buying and spend more than you can afford. Cards can be hazardous for someone who piles up credit-card debt or regularly hits overdraft fees.
That’s why the latest thinking is that it might be smart to fall back in love with cash – and embrace its inconvenience. ‘Cash slows you down – and this can be a good thing,’ believes Jasmine. ‘Withdrawing cash can be an eye-opening experience. Deciding how much you need makes you think about your budget. It can feel different from the almost haphazard method of throwing a card at every expense that comes up in your daily life.’
There are other benefits, too. Using cash can help you overcome urges to buy on a whim. ‘Expensive impulse purchases are less tempting when you’ve got to search for the money in your purse. Delaying a purchase often gives you valuable thinking time to question whether you really need the item.’ The good news is that to help gain back control of your spending, you don’t have to bin all your cards (unless you want or need to). The following strategies could help make your bank balance healthier and change your relationship with money for the better.
Time to become a fan of cash again!