Should You Stop Carrying Cash?

by Jessica Sommerfield · 40 comments

Welcome to the age of electronic fund transfers, debit and credit cards, and online banking.

Carrying actual cash in your wallet is now optional, while paying with plastic has become the convenient choice. A recent survey from Bankrate indicated that 9% of Americans carry no cash at all.

Of those who do carry it, the majority carry no more than $50, while nearly half carry less than $20. One of the main reasons for this shift are the many advantages of paying with plastic, including the ability to earn points and rewards.

Do you think carrying cash is outdated?

Though ATMs are seemingly ubiquitous, what happens if you aren’t near one? Carrying some cash in your wallet in case of emergencies seems like a good idea, but how much?

Personally, I fall into the “carries $20 or less” category. Most of the time, this suits me just fine. I work at a retail establishment where I can get cash back for purchases with a debit or credit card, in the rare case I know I’ll need cash for something. There are times I regret this habit, and other times when it appears to save me money. Here’s what I mean:

The Cash Conundrum

Why You Shouldn’t Carry Cash

  • Loss: Cash not only takes up extra space in your wallet; it’s also easier to lose. How many times have you discovered that a $20 bill slipped out of your pocket, or got eaten by the washing machine? If you carry cash regularly, probably more times than you can count.
  • Theft: For thieves who aren’t tech-savvy enough to steal someone’s identity or avoid debit/credit card theft deterrents, cash is the easiest currency to steal and use without detection.
  • Overspending: The very real temptation of having cash (when it’s the only accepted mode of payment) often creates a crisis of self-control you wouldn’t even have to struggle with if you didn’t have cash in your wallet. This has been a great money-saving technique for me. Often I’ve been tempted to purchase items at a yard or bake sale, only to realize I have no cash. Of course, this very same blessing in disguise can be a cause of frustration if the purchase is something you really need.

Why You Should Carry Some Cash

  • Emergencies: If your car breaks down and you need to pay a towing service out-of-pocket until your insurance company reimburses you, having cash is beneficial. There are also situations when businesses and venues that normally accept credit cards are unable to because of electrical or computer issues.

Although cash is easier to lose and bulkier to carry, if you keep it tucked away in an inner part of your purse or wallet and don’t get it out unless it’s absolutely needed, you won’t even know it’s there (an advantage if you’d be tempted to spend it). You also don’t have to keep hundreds of dollars in your wallet. Though the $50 most Americans carry should be enough for common expenses, you should base this amount on your usual spending habits. Carry enough cash to cover an average credit card transaction you’d encounter while away from home.

There are both advantages and disadvantages to carrying cash. The most important thing is to be prepared for the unexpected and do what works best for you.

Do you carry cash? Why or why not?

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{ read the comments below or add one }

  • Mike H. says:

    Always $120 or so on me, another $1000 at home in emergency money. Like someone said earlier, power or computer interruptions can occur. I used to stop for coffee at an outdoor coffee bar near my old job. One day their power had just gone out. No one could buy a cup of coffee but me. A half-dozen people there couldn’t scrape up $2 cash.

    At 58 years old, there is so little out there in stores that I just HAVE to buy. My focus is dumping every spare buck in savings or retirement. So burning through my cash mindlessly isn’t happening.

  • Moola Mom says:

    Cash is king!

  • Lee says:

    I like to carry $15-90 cash, to pay for small purchases, partly for the reasons in this article, but partly to simplify balancing our checking acct & credit card acct.
    We also keep $60-150 cash hidden/secured in our home, for emergencies & to use if the electricity goes out.
    A few yrs ago, I did business w/ someone who gave me a small discount b/c I could pay in cash.
    & I don’t need to improve my credit rating b/c it’s already very good.

  • Jim @ CreditsPoint says:

    I always have a stash of cash in the family safe. You never know when you might need it. Who knows if a computer virus is going to crash the ATM system or a power black out knocks all the credit card terminals out. While it might sound a little like the apocalypse is coming, a little gold doesn’t hurt either.

  • Karen K says:

    I haven’t had credit cards for almost 15 years and never have a problem. If I go to a hotel or motel, I give a deposit. Just make sure that when you pay, the appropriate amount is deducted. The same if you rent a car. I had to rent a truck 2 years ago and had no problems.

    I just had a deck built this summer. I don’t have anyone that would have been able to do the labor, so I had to hire a contractor to do it. I live in a rural area and word of mouth and reputation for paying my bills got me the best contractor and where his labor cost me, the materials were cheaper because he gets them at cost as well as the fact that I told him I paid cash.

    He didn’t have to wait for a credit card or cheque to clear. I have to admit that my savings are a little low now, but I have a great deck and am frugal enough to have potlucks and picnics on my deck the rest of the summer!

    My project for this year (new deck) is ticked off my to do list. If I want something, I do save. I don’t live on a lot of money, but I don’t have any debt either.

    Instead of people giving me financial advice, they often come to Me for it. I’m a firm believer that you don’t have to tell people what you have, they will see if you are successful or not. I drive a very well maintained old car…haven’t had car payments for decades either!

    I love my lifestyle.

    • David @ says:

      That’s awesome Karen. Being able to pay cash does have its perks, and like you know, the reputation of always paying cash can sometimes yield even great results!

  • HTL says:

    Carrying some cash is never and will never be outdated unless you are super rich and have your own servants…. for rest of the +95% of people, carrying some cash is always a good idea. It is just convenient….feel good too…

    • David @ says:

      Never say never. 🙂

      One day we might have a standard payment system with a wrist band or something that will only work if it identifies that the owner is wearing it!

  • Noah says:

    Depends on the situation. Although there are risks for carrying cash as you mentioned, so is carrying your cell phone. It becomes prone to thievery, which can lead to exposing personal contacts, bank accounts, etc. I generally recommend people to carry no more than $50. That’s just the right amount of cash that I need when I go eating out with friends, filling up the gas, and etc. It is important to note that sometimes restaurants are “cash only” so always have spare cash and guard them well in your wallet.

    • David @ says:

      I worry about losing cell phones too, so that’s why I setup a key code so it’s not trivial to see everything inside my phone. I’m also prepared to use the “delete data” feature from my phone if I ever lose it for more than a couple hours.

  • Maurice Dobb Finance Writer and Trader says:

    Credit cards are one of the worst habits that generally put us into trouble. Some 5 years back I was in a big trouble when I defaulted. It was really a problem. Perhaps that’s the reason why I’m a bit outdated and still love carrying cash. However, it does not mean that I don’t use cards. Yes, I do. But judiciously and not in a reckless manner I used to do in my 20s. I’m a frugal person and even plan my expenditure (probable) a month back. This helps me spend money carefully. I hardly overspend. Whenever I use cards the first thing I keep in mind is never miss payment dates and my credit score is great now, which hovered around 200 points just 5 years back. I still carry cash in my wallet but that’s negligible. While doing groceries for the month or any paying monthly bills I use cards. This gives me lots of reward points that help me in turn. However, I always make sure that I never miss a single payment.

    • David @ says:

      Great turnaround Maurice. I’m sure the process 5 years ago was painful but with the learned habits, you will be financial independent in no time!

      • Maurice Dobb Finance Writer and Trader says:

        Exactly! The lesson I learned, I’ll never forget in my life. And I hope this will sail me through the numerous problems I’m going to face till my last breadth.

  • Alex @ Credit Card Xpo says:

    While I do try to pay for everything with my credit card, I like to keep $20-$100 cash in my wallet as backup. I also like to keep $20 in my car for emergencies in case I forgot to carry my wallet.

    • David @ says:

      Keeping $20 in the car is a great idea but I never remember to do it. Thanks for the reminder Alex!

  • Jill Pruett says:

    I am a big fan of using cash for a strange reason probably wouldn’t work for anyone else.

    I am extremely anal retentive about identifying exactly how I spend cash, balancing out my wallet against my Quicken file, and doing this anytime I spend money. Dealing with cash gives me a clear idea of what I am spending; using a credit or debit card disconnects me from spending.

    If I find myself at a yard sale, etc often I will leave wallet in locked car to slow down spending.

    I got into this habit many years ago when I was getting out of debt; precise attention to cash helped me spend less leaving more for debt pay down.

    • David @ says:

      With your good attitude towards money, I’m sure you can develop a good strategy with credit cards too. But it sounds like you have a good system going Jill, so why fix something that’s not broken?

    • Cyrus says:

      I don’t think it’s strange at all Jill. We use cash in a very similar way – to help prevent accidental overspending and to make specific categories of the budget easier to manage. We don’t track every single cash transaction the way you do, but we do put a small, set amount in each of our wallets for things like gas and the occasion meal away from home. With the same amount going into our wallets each month, we don’t need to track every bottle of water or pack of gum we buy, but we feel secure in knowing that’s how much we’ve budgeted for our wallets. When my wallet’s out of cash, I know I can’t buy lunch at work for the rest of the month!

      • David @ says:

        Cash really has a place in many people’s finances, because cash has a budget built in – when you run out, you can’t buy anything else!

        For those who tend to overspend with credit cards, using strictly cash really has its benefits.

  • Eric says:

    I always carry 5 hundreds hidden in my wallet. They’re large enough that I won’t spend them unless it’s an emergency (or I’m getting a great cash discount) and $500 is enough to get me out of pretty much any problem. For those that say “what if you lose your wallet?”… that’s true, however how many times have you lost your wallet in your life? For me, I’ve lost my wallet once in 34 years with $700 in it. Yes it sucked but that works out to $20/year for “insurance”… If I had only had my standard $500 in the wallet it would have worked out to $15/yr for insurance costs.

    • David @ says:

      $500 is too tempting for me! I might end up not being able to account for a bunch of things I spend with that kind of cash readily available.

      And I also won’t be comfortable paying in cash because I don’t want people to see me fiddle with so many bills in my wallet. But then you claim that it’s “hidden”, so that probably takes care of that.

  • CB says:

    One big pro of cash that was left out here: Not having a record of a purchase. Whether it’s buying weed (hopefully this isn’t an issue soon), visiting a strip club, drinking or maybe some other purchase you don’t want your wife seeing. Yes these are examples of a dirtbag, but there are other related examples.

    • David @ says:

      This sounds like a suggestion to get my wife a companion card!!

      (Tell me my wife didn’t send you to write this! :))

  • Syed says:

    I almost exclusively use credit cards for all of my purchases. In fact, I think having cahs makes me spend MORE money because I tend to think of it as”bonus” money that won’t really go into my budget. And I think a lot of younger people feel this way as well.

    Not getting rewards is huge too. You can pretty easily get 5 cents back for every dollar you spend once you learn how to use credit and gift cards effectively. I just recently got a $1,000 check from Chase for credit card use and sign up bonuses over the course of 6 months. I can’t remember the last time I found thousands of dollars lying around. Credit cards all the way.

    • David @ says:

      Just remember to treat the card as if it’s cash, and never overspend. It looks like you are doing just that so reap and enjoy the good rewards 🙂

  • Cyrus says:

    My wife and I use a lot of cash in our monthly budget. We have a set amount that goes into each of our wallets every month for gas, parking, lunch at work and other miscellaneous items. Then we have a food envelope for groceries and eating out. Some benefits of using cash:

    1. You spend less with cash. We consider ourselves very conservative with money, but there is no question that we would spend more every month on groceries and eating out if we swiped our debit card for every purchase. There is plenty of research to back up the theory that you spend less with cash. And no, you’re probably not the exception. If you’re using the best rewards card on the planet, you’re breaking even at best.

    2. Plenty of businesses are still cash only. We’ve been to many eating establishments, farmer’s markets and other small businesses that don’t accept cards.

    3. Cash is easier for eating out. When my wife and I are at a busy restaurant, we get our bill, drop down a bunch of cash to cover the bill and a generous tip (usually), and we leave. We never have to wait around for the server to come back and grab our card, wait for her to come back with the receipt, and then sign it. When we are splitting the bill with friends, we quietly chuckle at our companions trying to explain to the server how to split up the bill among 6 cards!

    4. You get better deals with cash. Many small businesses get you a discount automatically for paying in cash, and many more will often give you one if you ask for it. I saved a hundred dollars on our futon with cash, 200 dollars off a recent contractor remodeling project, and 800 dollars off my wife’s engagement ring because I paid in cash, just to name a few. That’s real savings – compare that to a 1% cash back credit card, where you’d have to spend over a hundred grand on the card to get that.

    • David @ says:

      Those are great reasons to use cash Cyrus. For some reason though, I find that I end up leaving a bigger tip when I pay cash because I don’t take the coins. Am I the only one?

    • Andrew says:

      You don’t end up spending more with credit cards if you have a thing called a budget. You already know what you have set up to spend you can’t go over that amount no matter how you pay cards, cash, chickens, whatever. You have a set amount to spend and you spend it every month.

      If you find you spend more with cards than cash, you should probably set up a budget. Then your spending is normalized no matter your payment. Then it only makes sense to get rewards for money you would spend anyways. (As long as you can handle credit responsibly of course.)

    • Cyrus says:

      My wife and I do have a written budget every month, but it’s a lot easier to not accidentally go over budget with cash. We always know exactly how much we have left to spend for the month, and when the envelope is empty, that’s it. With a card you spend time tracking every purchase or relying on a service like to hopefully categorize every purchase correctly and tell you how much you’ve spent. For us, it really comes down to simplicity, and since food is the our single biggest budget category (although housing is a close second), using cash for food makes our expense tracking so much less time-consuming.

  • David J says:

    Always have cash hidden away. Enough for a tank of gas in the car, emergency money in the house, and try to keep $20-$100 on ones self. Even though I pay most bills electronically, and use credit cards whenever possible, some places still only take cash and many people/businesses will discount for cash transactions (every card transaction costs them money). Spending with credit can easily get out of control so there are specific cards for certain purchases and a points card that works for everything else. If I can’t pay the cards off at the end of the month they get put away until paid. Using credit smart can yield a 1-3% discount on purchases or thousands of point to save on others. Using it poorly creates a disaster. Took years to build a score that’s almost 800 after destroying it… Life is easier with good credit but cash trumps all.

    • David @ says:

      Every time I see a small merchant taking cash only, I automatically wonder if they are trying to avoid paying taxes on business income. After all, more customers will come if they can use a credit card because they won’t enter the store if they don’t think they have the cash.

      Obviously I will never know the truth, so shouldn’t judge!

      • G says:

        I manage a small business and merchant fees are outrageous. It costs the business between $30000.-$40000 per year for the privilege of letting clients use credit cards. Credit cards are great for customers, but expensive for businesses.

  • Jamie V says:

    I only carry cash for use at the farmer’s markets, so I try to have $10-$20 in my purse at all times because who knows when I’ll need to stop? It’s been an interesting exercise to see myself get tempted by other things and go, “Oh but it only costs one dollar!” Then I think to myself, that dollar can buy me two apples, and vs the candy bar, they will leave me better off. Other than that, I use my credit card for the rewards, and pay it off every month. If I don’t plan on paying it off next month/if I wouldn’t be able to pay cash for it right now (access to an ATM aside), I don’t make the purchase because duh! I don’t have the cash! It’s going rather well for me; the discipline lessons teach me a lot about myself and my money habits.

    • David @ says:

      Good strategy Jamie. Your will be rewarded by your discipline as years pass with a fat bank balance 🙂

  • Retired By 40! says:

    Cash is highly outdated! Credit cards provide rewards, purchase protection, fraud protection, as well as being electronic you can track all of your transactions online! Cash it out!

    • David @ says:

      Cash IS out! And I find that when I use cash, I have a harder time keeping track of where my money is going too!

    • Bry says:

      I use cash for the exact same reasons you don’t use cash. Yes, you can track all your transactions online… but so can the government, corporations, data miners, spies, hackers, etc. They can use it to profile you, arrest you, market to you, the list goes on and on. Keep using your credit and debit cards but understand that when you do, you are becoming a commodity with every swipe.

      • jack says:

        don’t buy illegal things. And omg market to you?! ugh i hate getting coupons for stuff i buy regular in the mail instead of junk i don’t buy! not.

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