Let’s Talk: Cash or credit?

Twenty years ago, flashing a credit card to pay for something had a certain air of mystery to it.

If you were like the rest of us, you most likely silently wondered if the credit card bearer was incredibly wealthy or incredibly in debt. 

Paying in cash used to be the norm and if you really wanted something, there was no better feeling than putting away those notes each week in order to reach that savings goal. 

Do you remember getting your first pay packet stuffed full with bills?

Did you have money jars for different expenses or did you spend it all and hope for the best until it was pay day again? 

Back in March, The Reserve Bank said people aged over 65 use cash for more than half their payments and people on the lowest incomes also used cash the most. 

However, paying via PayPass, credit or debit is the norm these days as Australia moves away from cash only transactions — except when it comes to your favourite hole-in-the-wall restaurant of course. 

But a crackdown on cash-only businesses could soon happen after the Black Economy Taskforce said last month that powerful government agencies would examine “if there is a reason for businesses to operate on a cash-only basis”, especially when you consider the array of cheap non-cash payment methods available. 

The Sydney Morning Herald reported that cash-only businesses may well see incentives offered to adopt a non-cash business model in the mid-year budget review if the taskforce’s suggestions are taken on board. 

But will a cashless society happen sooner than we think? 

If you look at the numbers, in the past nine years, cash payments have dropped from near 70 per cent to less than 40 per cent, reported the SMH. 

Plus when you think about the growth of online commerce and the increased security and convenience of electronic payments — it seems inevitable. 

In Sweden, employees at a Stockholm firm are already being microchipped with a radio-frequency identification (RFID) chip which gives them access to doors and photocopiers. 

However, there’s a promise that sometime in the near future, the chip will allow you to pay for lunch in the cafe. 

While it all sounds very futuristic, it begs the question, are we losing something as a result of all these non-cash transactions? 

“Physically handing over cash is a different experience,” finance and investment expert Noel Whittaker explained. 

Speaking directly to Starts at 60, Whittaker said the convenience of plastic was too appealing for most people to ignore.

“What a cashless society has done is, it’s encouraged us to overspend and we’ve lost touch with the reality of money — when the credit card bill comes in, it’s like holy sh** because you often don’t realise how much you’ve spent,” he said. 

“The danger of plastic is that it’s convenient and you can’t do without it; you need a credit card to book a flight, pay for a hotel, rent a car, it really does encourage people to overspend without thinking.”

Whittaker said there were two types of people: those who were good with money, and those who weren’t.

“I think if you’re budgeting carefully, I don’t think it matters whether you pay with cash or plastic but if times are tough, then I think you need to revise whether or not you’re better off to pay cash,” he said. 

“Personally, I never carry cash anymore and I get very annoyed with businesses who don’t accept plastic or won’t accept a transaction under $5. That’s just ridiculous.”

He’s got a point. 

Is there anything more annoying than realising you don’t have any cash on you after you’ve already ordered your coffee at a cash only cafe? 

Whittaker says he finds it more annoying waiting for the person in front of him to count out their change to pay when the line is out the door and predicted that cash would eventually be phased out all together. 

“It’s like the blacksmith,” he said. 

“From a businessman’s point of view, it’s more efficient to not have cash on the premises. There’s no chance of theft because employees can’t stick cash in their pockets.”

However, the Australian Tax Office says there are some industries where cash use is persistently high — building and construction, restaurants and cafes, and hair and beauty salons are the biggest culprits.

Later this year, real-time digital payments are set to become a reality with a new $1 billion piece of infrastructure known as the New Payments Platform which means you’ll be able to pay someone via your smart phone instead of with cash. 

And some banks are even removing cash from their branches as the cost of holding cash becomes more expensive as its use continues to decline.