Are you ready to stop carrying cash? Are you thinking “been there, done that, years ahead of you dude?” That’s right—you are not alone in your quest to end the need for cash. According to a new report in Wired (April 2004, p. 59) almost 50% of all transactions are happening via electronic means.
Cashless economy—a nice term for credit card hell. Leaving aside the scary, psycho-religious fears of the one world system (the antichrist 666 take over), there are still many issues in a cashless society. Currently, the average American has over $14,000 (according to some reports) in personal consumer debt, not counting mortgage. And when you consider the fact that overdraft protection and the subsequent fees are a major cash cow for banks, one wonders if cashless is such a good idea.
For many who feel no need to balance a checkbook (“checkbook, what’s that?”) such cashlessness is a trap into danger. Many also fail to notice that by not using “real money” they spend more. Recently, in Lakeland FL, a McDonald’s owner put self-service ordering machines in the lobby as a way for customers to order their food. Not only have the machines been a huge hit, even inspiring lines to use the machines when a human is available to take the order, the owners discovered that customers spend about $1 more per order. That reflects about a 30% increase. Of course anyone who uses a credit card to purchase their gas could have informed those owners; on average a person who goes inside to purchase gas with their credit card will purchase more than JUST the gas.
So it’s evil, right? Well, maybe, but to bury our heads in the sand at the fact that a cashless economy is on the way accomplishes nothing. In fact, what must be done is to begin today to teach proper resource management based on this aspect of life. At the moment we can certainly still teach the concept of living within one’s means via cash and the simple envelope system. If your budget has you planning on spending $25 in gas over the month, then you place the $25 into an envelope and spend accordingly. When it is gone, then it is gone. You don’t use your credit/debit card to fill up.
However, in a cashless society, that simply will not be an available option. So, in this kind of society, how do we teach good resource management? Here are some simple thoughts that can guide us as we enter this brave new world:
Learn this mantra: “My credit/debit/prepaid card IS CASH.” Over time, this may not be as big a deal as young people grow up in a setting where there is no cash (hmm, what will the tooth fairy bring to little children?). But for now, my experience implies that most of us have a hard time convincing ourselves that the electronic 1’s and 0’s are real money.
Have a real budget. This cannot be over-emphasized. Obviously, a budget based on your real income and need expenses is critical today, but will be even more so in our cashless future.
Prioritize your time so that you spend at least one hour a week reviewing and keeping track of your spending. Keep in mind this is in order to protect your life and lifestyle long term. In our household, much of our banking is currently done via the bank’s online site. My wife spends approximately an hour overseeing this process.
Utilize the computer. Whether you are using your bank’s online electronic payment features or one of the many computer programs designed to help you with the books, the computer is your friend.
Understand the credit process. Flora Williams, PhD, AFC, RFC, a professor emerita of family economics and financial counseling/planning at Purdue University states, “For example, know whether your student loan is deferred for beginning payments, when the interest charges begin, or if the interest is also deferred.”
Plan ahead. Dr. Williams adds, “One of the curses of credit is that you no longer need to think, plan and set priorities; instead, one passively accepts all that credit can buy. Signing for a credit card to get a free candy bar or tee-shirt (or whatever) is not the right reason – it could be the most expensive candy bar or t-shirt you ever got!”
The review process will demand that you check your receipts, bills, fees and electronic transfers against your banks accounting of it. Whether you are using a computer budgeting program or something simpler such as a ledger book, you must maintain that record. While many will cease to have or use a checkbook, the idea of the central account at your bank will remain. The simple process of the bank raising your account due to deposits and lowering your account due to expenses will remain the same. However, to maintain your budget, you cannot simply use the bank’s summary total; you must remain vigilant over each category in your budget.
Stay on top of your electronic transfers—bills scheduled to be paid by your bank will happen electronically, whether you have the money in there or not. Some banks have a policy of paying the largest bill first, even if it is not the first transaction in your account on a given day. That means that one mistake can lead to major overdraft issues.
Be very wary of overdrafts. For some banks, the fee for this can range as high as $100 per occurrence, sometimes charged to a credit card, thus driving you further into debt. In a cashless society, the potential for overdrafts is very high when we do not keep abreast of our financial status.
Know the difference between a debit/bank card and a credit card. While a debit card actually provides protection for excessive debt, it has its own potential dangers. Each time you use it, the cash is immediately gone from your account. Consumer advocate Clark Howard urges you NOT to use a debit/bank card for online purchases due to electronic ID theft.
Know your credit limit is NOT an amount to reach. “Too many people see their credit limit not as the maximum amount of debt they can go into, but as an account full of money that they can spend.”- David Berky, debt counselor. Consider using pre-paid cards in lieu of your bankcard. That way you can limit yourself to your pre-determined budget amount. Pay off your credit card monthly—this discipline will help you hold yourself accountable and not enter ballooning consumer debt.
In the end, discipline and determination will remain the cornerstone. Even today where cash still exists, one can supersede the budget process by reverting to the credit/debit card once the cash in the envelope is gone. In a cashless society, extreme vigilance and focused oversight will be the rule to prohibit you from overspending and possibly ruining your life financially.
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