NEW YORK ( MainStreet) -- Much has been said about the rise of online and mobile banking, and while buying your morning coffee with your mobile phone or managing your bank account over the Internet may be more convenient than the old way of doing things, visions of a cashless society are probably missing the point.Even if smartphone apps and chip-enabled credit cards seem like they can take care of anything we want to do with our money, there are plenty of reasons people will always need cash -- and it's not just to buy drugs.
|Despite the rise of online and mobile banking, there are plenty of reasons why cash will be with us forever.|
Small businesses have always had to face a difficult reality when considering whether to accept credit cards, since every transaction is "taxed" by the bank that issued the card in the form of interchange fees retailers must pay. And even new alternatives such as the much-hyped Square charge fees, even if it does it differently from banks. >>Inflation Forecast 2012: How to Lower Your Personal Rate "I think for those small-scale merchants where the upfront costs of installing new technologies or the cost per transaction are daunting -- street vendors, for example -- some of them have not gone down the road of accepting credit card transactions," Graves says. "They are most comfortable with cash." That means the smallest businesses with the thinnest margins will always find a benefit in using cash to avoid paying a small percent of every transaction back to the bank, though there is only one scenario Graves sees that could trump this. "Ultimately the process of transition depends on the bottom line," he says. "Unless people put a cost on using cash it will probably never go away in its entirety." When you have a tight budget
Financial planners often give the advice of using cash as a means to manage debt and stick to a budget, and as long as people will struggle with the amount of disposable income at their disposal, cash will serve an important purpose. "In areas like bars there is a comfort in knowing when you've gone out that you have a set amount to spend that night," Graves says. "Studies show that when you spend based on your monthly salary versus what you have in your pocket, you spend more." Graves says many innovations allow people to track their spending digitally, like with alerts sent to mobile phones, but that "there's a control factor with cash that you will never have with other payments."