Cash helps you stick to a tight budget, helps with gifts and tips, and cuts costs
If you’ve tried paying for a flat white with cash in an urban hipster café recently you may have found that the barista looked at you as if you’d suggested using the barter system to pay .
Covid-19 lockdowns turbocharged the world’s transition towards a cashless future. Contactless payments were encouraged at the start of the pandemic as a way of preventing virus transmission by reducing our physical contact with staff and surfaces, though scientists later discovered surface transmission was not a significant risk. The limit for contactless card payments went from €30 to €50, and some bank branches were shut down temporarily.
By the third quarter of 2022, contactless payments accounted for 59pc of payment volumes in Ireland, and online mobile and banking payments hit record highs, according to the latest figures available from the Banking & Payments Federation Ireland (BPFI). But shops and cafes may be forced by law to accept cash payments to support new rules for banks, as a result of recommendations made in the Government’s Retail Banking Review in November. On foot of those recommendations, banks – which have been shutting branches and selling off ATMs -- will have to offer customers “reasonable access to cash” under a draft bill due to be tabled by the Department of Finance this year.
As businesses and organisations increasingly move towards cashless payments, people who rely solely on cash are being marginalised. But there are plenty of reasons why you should always hold some cash – even if you are viewed as an anachronism. Here are a few:
There’s a reason the less well-off prefer cash, especially during a cost-of-living crisis: it’s easier to manage your money when you can physically count it and you can only spend what you have.
“Lots of studies show that people spend as much as 40pc more when using digital payments than when using cash,” says Brett Scott, the author of Cloudmoney: Cash, Cards, Crypto and the War for our Wallets. “That’s because when you hand over cash, there’s a strong association with that money, whereas with digital payments, you feel like you’re not handing over anything.”
Gen Z and millennials may be the biggest users of digital payments, but they are also spearheading a revival on TikTok of an old-school money management tool: cash stuffing. Otherwise known as envelope stuffing, this budgeting method involves withdrawing cash from your account every month and physically allocating it to different envelopes labelled with categories such as “groceries” and “electricity”. Searches for cash stuffing videos on TikTok have run into the tens of millions.
Contactless payments were designed to replace cash for small transactions, such as your morning coffee and pain au chocolat. But some small businesses, such as cafes, pubs, newsagents and takeaways outside the large towns and cities, impose a surcharge for using contactless or card payments to cover the cost of their processing fees, even though they’re not supposed to under banking rules. The transaction fees incurred by these businesses depend on which card machine provider they have; SumUp charges 1.69pc per transaction, while Square charges 1.75pc plus VAT.
If you don’t have cash on you, you could be spending as much as 40c extra on that pastry or bag of chips. And while it’s not as common as it used to be, some small businesses impose a minimum spend of €5 or €10 before accepting your card as payment, which can encourage you to spend more to reach that threshold.
“Many small businesses prefer cash payments, as they may not have the resources to process electronic payments or may want to avoid paying transaction fees,” says Nick Charalambous, managing director of Alpha Wealth. “Having cash on hand can help you avoid these fees.”
Even if you have a contactless function on your phone, in some instances you will have to pop your card into a point-of-sale (POS) terminal and enter your pin. While some banks don’t charge for contactless payments, they will charge you for chip-and-pin. AIB charges 20c every time you do this, while Bank of Ireland charges 10c, so having cash on you will reduce these costs.
There are instances when carrying notes and coins is just more practical than using your digital wallet, from dropping cash into the collection box at mass and giving money to buskers, charity fundraisers and the homeless, right down to inserting coins into the supermarket shopping trolley, Charalambous says.
While fintechs emerged during the pandemic to enable people to tip everyone from food delivery drivers to restaurant staff electronically as cash tips dried up, cash is king when it comes to tips.
Then there are the big occasions, from weddings to confirmations and communions. Yes, you can Revolut the happy couple or young child a gift, but “having cash on hand can allow you to give a gift quickly and easily”, Charalambous says. Besides, a couple of notes in a birthday card from granddad has a more personal touch than a deposit into your Revolut account.
Power outages, natural disasters, cyberattacks and telecommunications failures can bring entire economies to a standstill, so you’ll need a reserve of cash to pay for food and other necessities.
That was demonstrated last month when New Zealanders were left unable to pay for vital goods such as food and water for days after cash machines and payment systems were knocked out by a cyclone. During Hurricane Sandy in New York City, New Yorkers walked miles uptown to withdraw cash, after electronic payments became impossible in many parts of the city. In Dublin, electronic payments failed at the cashless Aviva Stadium for two hours during an American college football game last summer so the caterers had to give away most of the stock for free.
If you’re travelling to Sweden or Norway, where less than 10pc and 4pc of payments, respectively, were made in cash in 2020, you’ll have no need to go to the ATM. But the further south you go in Europe – Italy, Spain, Greece – the more you’ll need to carry cash if you’re on holidays. For example, Italians used cash for 82pc of transactions, according to a 2020 study by the European Central Bank.
Unless you’re paid in cash, getting access to it is no easy feat these days, thanks to the banks shuttering branches, selling off ATM networks, and the departure of Ulster Bank and KBC from the Irish market.
In many small towns, the only ATM – usually owned by an unregulated operator -- is located inside the local convenience shop or supermarket. When that retailer is closed, access to cash is off limits, unless you want to drive miles to the nearest bank ATM. The percentage of the Irish population living within 5km of an ATM is among the lowest in the eurozone, Central Bank research has shown.
The 30pc reduction of Ireland’s ATM network between 2017 and 2020 was the third-biggest decrease in the European Union after the Netherlands and Belgium, according to Deloitte figures cited in the department of finance’s Retail Banking Review. Small wonder that the number of ATM transactions declined by 46pc between 2015 and the end of 2021.
Get in the habit of asking for cashback when you’re buying your groceries because you’ll pay through the nose with some providers for regularly withdrawing cash from an ATM – if you can find one. AIB charges 35c for every cash withdrawal, while N26 customers are charged €2 per withdrawal if they exceed their limit of five withdrawals a month. With Revolut, you pay a fee after withdrawing €200 a month or after your first five free withdrawals per month – whichever comes first. That fee is 2pc of the withdrawal, subject to a minimum fee of €1.