Cashless Society?

Lämmchen said:

Would a cashless society help or hurt? More and more businesses in the US are opting to no longer accept cash.

People who live in the poverty line have trouble getting credit cards and many of them do not have checking accounts. So it would hurt them if they cannot use cash to pay for items.

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I find the concept terrifying.

The beauty of cash is that it is simple, and it is anonymous. If I want to go and buy a coffee or a magazine or a cake or something it's nobody's business but mine and the seller's. And with cash I can do that - walk into a cafe, hand over some untraceable pieces of paper, and walk out with a product.

Government goes through the motions of pretending they want to crack down on money laundering and the like but in practice what I think they want is ever-more control. Rather than tackle the big-time kleptocracy they want to make it harder and harder for the little people to do a bit of work for cash-in-hand, and in the process make it harder for the little people to go about the process of just living their lives. Perhaps some people who work for cash don't declare it on their tax returns but trying to solve that problem by doing away with cash is like using a nuclear warhead to crack open a nut.

Even aside from concerns about those at the bottom end of the economic spectrum who don't even have enough cash on hand to operate a bank account without having to pay money they don't have to run it, the basic concepts of privacy require that there be a way to conduct our day-to-day lives without Nanny State being able to watch over every single thing we do.

As shopping moves online it is ever-easier for people to effectively become blacklisted - sites like Uber and Amazon periodically trigger outrage for cancelling someone's account. Just imagine if some bureaucrat cancelled the only way you could possibly pay for things, especially if it was one of the situations where the government gets it wrong and leaves someone as persona non grata until such time they can prove they are innocent in the face of a government that doesn't really care. And that doesn't even touch on the way something like this could develop into the mark that was required to buy or sell.

I am quite bothered by this because of the possibilities of identity theft, in addition to the issues that others have brought up about those who live in poverty and/or do not have bank accounts.

The other thing is that I had a terribly unpleasant exchange with a hotel worker once a few years ago. I do not have a credit card. I have saved for everything and paid cash rather than pay with a card and incur debt. So I made a reservation using my mom's card, and when I got there, they told me I had to produce the card. I was quite upset and told them it was mom's. They were not going to let me stay there, even though I had cash for the deposit. They said they don't accept cash. No hotel does. Things like this are becoming more and more common, so it seems I have no choice but to get a credit card... The first time in my life yesterday I accepted the pre-approved card from my bank. I hate being pushed into doing things I don't want to do, but society has changed and I have no choice.

As well, I have my deep concerns about the things tango mentioned with regard to the mark required to buy and sell. It seems when credit cards first came out, that was a concern. Same when debit cards came out. Now, though, it is even more concerning when we are doing away with the cash alternative.

I have always favored cash for purchases less than, say, $50. However, I have lately noticed something between annoyance and surprise on the part of people working at the check-out stations of various businesses when I subject them to handling cash, making change, etc.

I used to think that businesses did not want credit cards to be used for small purchases--they have to process them and pay a fee--but other considerations may now be overriding that.

ValleyGal said:

I am quite bothered by this because of the possibilities of identity theft, in addition to the issues that others have brought up about those who live in poverty and/or do not have bank accounts.

The other thing is that I had a terribly unpleasant exchange with a hotel worker once a few years ago. I do not have a credit card. I have saved for everything and paid cash rather than pay with a card and incur debt. So I made a reservation using my mom's card, and when I got there, they told me I had to produce the card. I was quite upset and told them it was mom's. They were not going to let me stay there, even though I had cash for the deposit. They said they don't accept cash. No hotel does. Things like this are becoming more and more common, so it seems I have no choice but to get a credit card... The first time in my life yesterday I accepted the pre-approved card from my bank. I hate being pushed into doing things I don't want to do, but society has changed and I have no choice.

As well, I have my deep concerns about the things tango mentioned with regard to the mark required to buy and sell. It seems when credit cards first came out, that was a concern. Same when debit cards came out. Now, though, it is even more concerning when we are doing away with the cash alternative.

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In the context of a hotel it makes some sense to require a credit card, given that if a guest does extensive damage to a room they want more than a couple of hundred dollars in cash as a deposit. I imagine also that hotels are coming under pressure not to allow unknown people to book rooms because of vaguely defined security issues (because, you know, organised crime gangs and terrorist groups couldn't possibly get a credit card in a false name) and so don't want to deal with cash.

I can also see a concern about businesses dealing with large sums of cash not wanting to be vulnerable to the risk of someone coming by to relieve them of their cash. Although credit cards carry a fee they make a lot of the issues of handling cash go away. With contactless cards becoming ever-more popular it's hugely convenient to just touch a card to the reader and not have to do anything more, especially since it means you don't end up with a growing pocketful of change. There are even services out there that will automatically round up your purchase to the nearest dollar and put the change into a savings account for you, the intention being that you slowly save up a little nest egg without even noticing the amounts involved.

That said, one coffee shop I like to use has a stage that always happens when paying by card, namely the bit where it asks you for a tip. In a coffee shop I find that quite awkward because I don't really see why someone deserves a 15-20% tip for the monumental task of pouring coffee into a cup and handing me the cup. But at the same time clicking the "no tip" button is obviously designed to make the customer feel like a cheapskate. I often wonder whether the "add a tip" stage ends up taking just as long as waiting for your change.

From the perspective of a business owner cards make a lot of sense because you don't have to deal with cash, don't have to worry about a float, staff with sticky fingers can't lift your cash from the till and you can't be robbed for your cash. Your money automatically goes into your bank account, usually within a day or two (and some providers have an option to credit it instantly, for an extra fee, if you really can't wait until tomorrow for it). From the perspective of a business owner it also makes marketing easier because you can see your repeat customers and possibly tailor promotions to them (the kind that says "hey, you've come here six times in three days, why not stop by again and we'll give you something on us?"). The main advantages I see from the perspective of a business owner are either tax evasion (a payment in cash can be denied) and convenience in the context when the business owner is a customer (e.g. when you want to go to the coffee shop next door for lunch and it's easier to just pay cash).

I can easily see a hotel being concerned that if 50 guests show up and place a $200 cash deposit each, the hotel has to have $10,000 in cash floating around ready to return to customers when they leave without damaging the rooms or emptying the minibar, they have to check the room as the guest checks out to make sure the deposit can be returned and then have no means of levying a charge if they find out something is wrong. And of course all the time they are vulnerable to someone coming in and helping themselves, aided by the threats of violence, to that $10,000 that the hotel then has to replace.

Lämmchen said:

I used to accept credit cards for my portrait business and the fees ate into my commission so I hated taking them...but I had to for the convenience. I offered other items like note cards that were cheap so using a credit card on those meant I didn't make much profit after fees. If I ran my business today I'd have to charge a lot more to cover fees and not worry whether people wanted to pay those expenses or not. That's what we'll have to put up with even more with businesses who won't accept cash.

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Well, I didnt catch the whole story when I heard about this matter on TV this morning. It seems to be a phenomenon mainly of convenience stores in big cities, so I suspect that security is the main reason for requiring credit cards.

Lämmchen said:

I used to accept credit cards for my portrait business and the fees ate into my commission so I hated taking them...but I had to for the convenience. I offered other items like note cards that were cheap so using a credit card on those meant I didn't make much profit after fees. If I ran my business today I'd have to charge a lot more to cover fees and not worry whether people wanted to pay those expenses or not. That's what we'll have to put up with even more with businesses who won't accept cash.

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That's the trouble with them - you offer cards for the benefit of people who want the $180 item but don't carry that kind of cash, and then find someone buys the $2 notecard and wants to pay with American Express.

[MENTION=62]tango[/MENTION] I get what you are saying, and it makes sense, but if someone does a bunch of damage, what's to stop them from calling their credit card and putting a stop-payment on it, or reporting it stolen?

@Lamb I also don't understand why there are all kinds of places that accept a credit card over the phone or online, and they do not need to see it when the items are picked up or delivered, yet hotels require to see it. And yes, it really is a step backward. After all, I spent my life earning, so I could save before I buy. It's good to learn to save. But with credit cards, people are getting into more debt than ever before - they are learning to spend before they have the money. That's a scary prospect because what happens when they can't keep up, or if they lose their jobs, or have some other crisis that prevents payment.

ValleyGal said:

[MENTION=62]tango[/MENTION] I get what you are saying, and it makes sense, but if someone does a bunch of damage, what's to stop them from calling their credit card and putting a stop-payment on it, or reporting it stolen?

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There are assorted ways that people might try to get out of paying but all it takes is a short piece of CCTV footage to place the person in the general area of the alleged event to start to unwind their claims. You can dispute a charge but if the hotel were to produce pictures of a destroyed room (as they would probably have, had you done that much damage) it would be more likely the appeal would be denied. No guarantees of course, but the hotel has a lot more chance of recovering the money if you have a credit card on file than if you just put up a bit of cash and they had no further recourse.

@Lamb I also don't understand why there are all kinds of places that accept a credit card over the phone or online, and they do not need to see it when the items are picked up or delivered, yet hotels require to see it. And yes, it really is a step backward. After all, I spent my life earning, so I could save before I buy. It's good to learn to save. But with credit cards, people are getting into more debt than ever before - they are learning to spend before they have the money. That's a scary prospect because what happens when they can't keep up, or if they lose their jobs, or have some other crisis that prevents payment.

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If you do a CNP (cardholder not present) transaction there are usually some checks and balances in place, even if it's nothing more than entering the ZIP code where the card is registered. If you are present at the time of the transaction the merchant needs to see the card. A hotel would struggle to claim that a guest was not present at the time of their stay so the CNP transaction model doesn't work for them.

Credit cards used badly are very bad for personal wealth. Most people pay interest endlessly, never really understanding what is being done and why they have created a rod for their own backs. Used wisely they can be very useful - my credit card gives me 6% cash back on grocery shopping, 3% cash back on gas (which, interestingly, includes my heating oil bill) and a few other things, and 1% on everything else. So my $100 shopping bill at the grocery store effectively costs me $94. The cash back accumulates on my account until I claim it, which is handy because I can roll it a few months and ignore it and then see that I've got several hundred dollars that I can take as a statement credit.

Tango, the things you are saying make a lot of sense... I still don't like that I can't just use cash. I really need a vacation, so I suppose I need the card. I wonder why they won't take a debit card and then just reimburse the debit when they find no damage. But anyway, it is what it is, a different society than the one I grew up in and learned to save before you spend.

And now I will have to learn to maximize the use of a credit card. I mean, I know the basics - pay it off every month - but I need to figure out the perks, like you have.

Making a transition to card use is hard enough... and in my opinion, one more step towards signs of the end times. There will come a time when cards will be obsolete, and then we will all be praying that the Lord would rapture us soon....

ValleyGal said:

Tango, the things you are saying make a lot of sense... I still don't like that I can't just use cash. I really need a vacation, so I suppose I need the card. I wonder why they won't take a debit card and then just reimburse the debit when they find no damage. But anyway, it is what it is, a different society than the one I grew up in and learned to save before you spend.

And now I will have to learn to maximize the use of a credit card. I mean, I know the basics - pay it off every month - but I need to figure out the perks, like you have.

Making a transition to card use is hard enough... and in my opinion, one more step towards signs of the end times. There will come a time when cards will be obsolete, and then we will all be praying that the Lord would rapture us soon....

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Using a credit card is remarkably easy.

Every single time you use the card, mentally assign that much cash out of your bank account. Make sure you pay in full every month without exception. Make a note (a literal, physical note) of what you're spending on your card so you don't get any nasty surprises at the end of the month - if you're paying in cash then a $200 bill means handing over ten $20s, but when you're paying with a card the process is the same whether the amount is $20, $200 or $2000. It's the same process if it's $20,000 or $200,000 except with a higher chance your card will be declined because of insufficient credit.

The other thing is to find the card that offers benefits that suit your spending patterns and your lifestyle. Some cards offer some really impressive benefits but they're no use unless you're going to use them. To take an easy example, the American Express platinum card offers some quite impressive travel benefits, including (among other things) 5x points for flights booked with airlines and complimentary access to their Centurion lounges at airports. If you are a frequent flyer those benefits are valuable. If you never travel by air the benefits are more or less worthless. You also need to consider the value of the benefits, based on your usage and your lifestyle, against the annual fee to own the card. That Amex Platinum offers benefits worth a lot of money to the frequent flyer but it costs $550 a year to keep the card.

My card is a simple cashback card that doesn't deal with points, or revolving purchase categories, or formulae I need to think about. It's just a simple process - grocery stores get 6% back, gas stations and selected department stores get 3% back, everything else is 1% back. So instead of figuring that I can use my points for this or that, or convert them into air miles with one airline to then book a code-share flight on another airline and get 1.2c per point instead of the 0.8c per point value for turning them into cash, it's a simple matter of deciding when I want to take a statement credit. What I personally do is let the free money accumulate and then take a statement credit when I've got an unusually large purchase on my card, to effectively let Amex pay for my purchase for me. So I put just about all of my spending through my credit card because I might as well get some free money out of the deal.

A lot of cards will offer some impressive initial bonuses which are worth looking into but only if you're likely to spend the minimum required without changing your spending pattern. It's easy to spend $5000 using your new card in the first three months in order to get the bonus but, depending on your budget, it may not be as easy to pay that money off again. If you start your new credit card with a rolling balance the interest you will pay will very rapidly outweigh the benefits of the initial bonus. And of course you'll pay the annual fee for every year you keep the card, but will only get the initial bonus once.

I understand the basics. My card gives air miles at certain stores, and a few other little perks. I didn't want anything fancy, and I'm only going to use it for groceries and gas for my car. They offered me a fairly high limit, and I asked them to cut that in half - just in case my information is ever compromised, no one can spend more on it than I can afford to pay back, if necessary. Anything else, and I'm going to do what I've always done. Save before I spend.

ValleyGal said:

I understand the basics. My card gives air miles at certain stores, and a few other little perks. I didn't want anything fancy, and I'm only going to use it for groceries and gas for my car. They offered me a fairly high limit, and I asked them to cut that in half - just in case my information is ever compromised, no one can spend more on it than I can afford to pay back, if necessary. Anything else, and I'm going to do what I've always done. Save before I spend.

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It's a good plan to save and then spend, and a credit card doesn't stop you doing that. It allows you to spend first and then pay it later but doesn't force you to do that.

As a rule if your card is compromised you shouldn't be expected to pay back the stolen money. In many ways it's good to have a high limit so you don't use too much of it - part of your credit score is based on what percentage of your credit line you are actually using. I can see the reasoning in figuring that the person using 95% of their credit line is more likely to be in financial distress than the person using 15% of theirs but at the same time the person with a $2,000 limit who routinely spends $1,800 in a month and then pays it in full is clearly no more or less financially distressed than the person who is identical in every way except for having a $20,000 credit limit.

If your credit card supports it, set up email alerts that let you know when your card is used. I've got mine set up so I get an email for every transaction where I wasn't physically present, however small. I get another email for any large purchase, and I can define what counts as a "large purchase". It's a useful feature to help keep on top of what is happening with my card.

Tango, that's a good idea to get it set up for email notifications. I'll see if they will do that for me. Even though I cut the limit in half, I will still likely use less than a third of it every month. I don't spend much.

Lamb, that happened with me and a debit card. Someone got the information from a card reader at my usual gas station. They made a card, sold it, and my whole account was emptied. Whoever got it, spent up to $900 at a time, 3-4 times a day at Wal Mart. They went to about 5 restaurants in a day and spent upward of $1000 on the most expensive day, just at the restaurants. This was a long time ago, before financial institutions started being more sympathetic to this kind of issue, so I was on the hook for all purchases except those that could be proven when I was not even in the same province. In all, they stole about $35,000. They had purchased a cell phone and made prank calls to 911, too. Was quite the shock when I got phone calls and visits from police. Scary time for me... I was really fortunate that it was only my bank card, though, and not my social insurance number. That would have truly been a nightmare!