6 Reasons Why Cash Is Still King

By Kentin Waits. Last updated 31 August 2010. 11 comments

Lately, I've noticed more and more credit and debit cards being whipped out for transactions large and small. It's as if cash is becoming a rarity and folks don't even have $4 of the green stuff on them for a latte anymore. When I have dinner with friends, I sometimes long for good old paper money at that critical moment when the check arrives — wallets open and out come four or five different (albeit attractive and shiny) plastic cards. The result is as universal as it is tedious: cards are swiped, tips tallied, PINs entered or signatures given, duplicate receipts divided and dispensed, etc. I've refinanced homes in less time than it takes to settle the tab for a group dinner lately.

Cash seems to be on its way out, becoming merely a vestige of a simpler, more direct economy. As one of the few hold-outs who still pay the old-fashioned way, I'd like to offer the following secret and not-so-secret reasons why cash is still king.

1. It's Universal

Cash is accepted everywhere. Big chains, small mom-and-pop shops, malls or estate sales, cash is still the most direct and universally-accepted way to pay.

2. It's Quick

I don't quite agree with what the ad industry wants us to believe. Credit cards and debit card transactions take more time in most cases than having the appropriate amount of cash in hand. I've been in line behind too many folks who can't quite figure out what direction to swipe their cards, where to input their PIN, and which toe to tap while their bank is contacted for approval. Granted, it may be only seconds, but if we're looking at speed, seconds count.

3. It's Influential

Nothing speaks more clearly and directly as pulling out the greenbacks when you want to buy that used car or vintage guitar you found on Craigslist. The immediacy of cash lends itself to a bit of negotiating power, whether you're buying used or new. Even larger stores prefer cash to avoid fees that are part of most merchant credit card agreements, and that preference can often give the buyer a rare bit of leverage.

4. It's Anonymous

I don't lean toward conspiracy theories, but I do think our lives are less private than we'd like to believe. What, when, and where I buy is my business. Cash typically helps ensure that my transactions are lost in beautiful anonymity.

5. It's Simple

Credit card companies win in two ways every time you make a transaction. First, they're paid by the merchant to have a license which allows that store to accept your card. Merchants charge that fee back to all of us via a slight uptick in prices. Next, the credit card company charges you interest on your purchase if you fail to pay off your accumulated balance in full each month. And for all their trouble collecting fees left and right, credit card companies end up with loads of data about our buying history and purchasing behavior. What a deal!

Debit cards aren't much better — same vendor charges but replace those interest charges with overdraft fees unless you're on top of your game. Cash, on the other hand, supports no such fee structure. There is a single transaction with no secondary charges or supporting transactions that serve only to make guys sitting in glass offices a bit richer.

6. It's Direct

Cash is self-limiting and direct. If I start out the week with $200 in my wallet, I can toss every receipt I get and put my checkbook on ice and still know down to the dollar what's left in my budget in just a few seconds (no smart phone or computer required). Cash is tactile. It always works in real-time and seldom carries a "gotcha" at the end of the week.

I'd be naïve to suggest that credit cards, debit cards, and even checks don't serve a valuable purpose in certain situations. If you need a record of large transaction, are seeking reimbursement for multiple expenses, traveling where currency conversion is an issue or fear cash being lost or stolen, then certainly embrace other more appropriate methods. But for the day-to-day business of life, cash still offers a flexibility, immediacy and influence that can't be beat by plastic.

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Guest's picture

On the other hand:

1: Cash transactions require math skills in the form of counting change, something all too often lost on the teens manning the mall shop or fast food place.

2. Cash doesn't offer rewards the way many debit cards do (ignoring credit cards for the sake of the fact that it takes discipline to pay it off at the end of the month). With my meager income I can still use my debit card enough to earn more than $100 in cash returns over a year's time.

3. It is sometimes possible to access funds faster with a debit card than cash, if your bank doesn't allow ATM withdrawals on pending deposits but will allow card purchases.

4. Paying for gas with cash is a pain in the neck.

5. ATM fees can eat up a large chunk of your money when retrieving cash for your purchases.

6. You might miss a deal if you don't have enough cash on you at the time. Although admittedly this can be a positive of cash also, forcing you (at least temporarily) to stick to a budget.

As with many things, weigh the pros and cons that are important to you and find a balance. :)

Guest's picture

The primary reason I don't use cash? Mint.com .

They make budgeting so easy, and I've never managed money as well as I do with Mint. Only problem (if you can call it that) is that since it's e-linked to all credit and banking accounts (and automatically files and labels purchases, applying them to your monthly budget as you go), using cash really messes with the system. I still carry cash for group dinners and farmers markets, but I use cards for EVERYTHING else.

Guest's picture

More people carrying cash = more crime.

Europe and Australia have this figured out, North and South America don't.

Guest's picture

Very reminiscent of the Back To Cash Movement championed by Suze Orman. I agree with most of your points completely.

Guest's picture

You make good points. However, I would have to agree with the other commenters. Although cash is nice to have around, credit cards offer cashback rewards, cash is harder to budget (using my style of budgeting), and cash is more easily stolen and harder to get back.

My suggestion is to keep cash on you (I usually keep about $40 on me) and credit cards.

I use my credit/debt cards almost all of the time. Then, there are some places that only accept cash. Or some places that only accept cards, despite #1 in the article. When I need to use the cash, I use it. It's my backup, just in case credit doesn't work.

Guest's picture

Couldn't agree more. I think people sometimes get too caught up in trying to find the best place to invest their cash that they underestimate the value of just holding their money, or at least a portion of it, in cash.

Guest's picture

I wish more people thought this way. I love to spend money with cash - it's a great way to plan and keep my budget! If the cash is gone, I guess I have nothing more to spend! Mostly, I have learned these lessons the hard way, but it has been a fun journey. You can follow my journey as well as learn some new financial tidbits on my website: www.lifeandmyfinances.com . Check it out!

Guest's picture

Interesting topic, I agree that Cash is King. Although, I find it to be quicker to pay with credit/debit in most places because making change seems to take a lot longer than it used to.

I actually wrote a blog post related to this topic, Cash is King: Sometimes it’s the Only Way to Pay - http://gainmoneycontrol.com/cash-is-king-sometimes-it’s-the-only-way-to-pay/

Guest's picture

Sorry, but you really weighted the speed issue when you stated "having the appropriate amount of cash in hand." How many people are going to be standing in line with exact change for their purchases after taxes? Not many. Plenty will dig through their wallets or purses to scrounge a couple of coins, or will wait as the cashier retrieves their change. God forbid they're out of pennies, then you'll be waiting as the manager brings up a new roll.

I agree about needing cash for purchases from private sellers via Craigslist, etc. However, why would you be carrying enough cash day-to-day to purchase a used car? A stop by the bank would be necessary whether you're a cash or plastic carrier in these instances.

I rarely ever carry cash on me anymore. I just don't see the need. Very few establishments I frequent don't accept credit/debit cards. In those cases, they always seem to have an ATM on hand, or I run through the bank drive-up on my way.

I find the lack of anonymity to be a good thing. Paying by card keeps a tally of when, where and how much I spend. No longer do I stop to wonder what I did with that last twenty. Did I spend it? Did I lose it? I don't have any cash on hand to lose, or be stolen. If a card is lost or stolen, you simply make a phone call and cancel it. Lose cash, and it's gone.

Kentin Waits's picture

Good points. True, I wouldn't suggest that we should all be walking around with $5-10K in our pockets for a good used car. My point is to assert that cash is often simpler, more efficient and faster than debit or credit. Just this morning I was in line behind someone at the supermarket and the machine didn't read her debit card correctly, then the PIN number she entered was incorrect or mis-typed. I was ready to go with my ten-dollar bill for about 5 minutes before it was all rectified.

Guest's picture

There are many countries where it's perfectly normal to carry large amounts of cash for day to day use even when credit cards are widely accepted. Japan is a country with high cash usage and low crime rate. Also, if your brain is wired correctly, every time your wallet is separated from cash, the pain receptors should go off in your head. With plastic (credit or debit), there isn't the same feeling and in some cases the reward mechanism goes off. It's easy to spend $500 on plastic. Taking out 25 $20 bills will make you hesistate.

Guest's picture

There are times when the computers are down so you can't use cards or chips to process your purchase, if you have cash however in most cases you can still make the purchase and be on your way.

One time as a Truck driver I purchased fuel
then after fueling up as I went to pay the pay the computers went down, fortunately I had enough cash to pay for the fuel and go on my way. on my return trip I stopped at that same truck stop to eat about 9 hours later, the computers were still down
and I say two drivers who fueled when I had fueled who were still stuck waiting,
modern technology can be a real bummer
unless you can manually bypass it and do things the old conventional way, too many
merchants have burned the old bridges behind them and lose business during times that computers are down or during a power outage.