How paying with cash can help consumers save money
Cash is king, or so they say. But COVID-19 has been one of the single greatest forces in moving toward a cashless society. As many consumers had already begun paying more frequently with cards and apps like Apple Pay, now companies that may have preferred paper before have had a switch in their mentality as cashless payments are seen as safer in protecting both their employees and customers against the coronavirus.
That being said, cash is still very much alive, and those bills could ultimately be a way to help consumers save money in the long run.
Save and track spending
Consumers have more of an emotional attachment to physical cash than they do the swipe of a credit card. Handing over the big bucks (and even small ones) can be painful for consumers, and thus, the purchase has more meaning.
On the contrary, card and digital payments have a certain degree of suspended reality, which is what leads some consumers to overspend and wind up in debt in the first place.
According to the Federal Reserve Bank of Boston’s 2016 Diary of Consumer Payment Choice, the average cash transaction is $22, while the average non-cash transaction is $112. With credit cards, there are often spending minimums, especially at smaller mom-and-pop retailers. For that reason, consumers who opt to pay with a credit card may need to make an additional unintended purchase to meet that criteria.
The inconvenience of having cash on hand can also help people save. People may need to go out of their way to withdraw funds from an ATM, which could help them stick to a stricter budget and deter them from making unnecessary purchases. Basically, the harder it is to find the dough, the harder it is to spend it.
Get better deals
Paying with cash can be a negotiating tactic. Financial experts agree that carrying physical money can offer a better return on investment. Waving cold hard cash at a retailer is a good way to get their attention.
Some smaller retailers even explicitly offer cash discounts. After all, consumers aren’t the only ones paying each time they run their card. Merchants have to pay fees for each of those transactions too. In order to make up for those fees, retailers may impose a surcharge on the consumer. With cash, the customer and store can dodge that extra charge.
Use extra funds to pay off debt
Not only does paying with cash prevent building up debt, but this budgeting system can also allow consumers to pay down existing debt with what they’ve saved. Consider the $90 difference between cash and non-cash payments and what kind of impact that amount could have on a repayment plan.