Are we becoming a cashless society?

Sally McMullen 8 March 2016


As card payments increase and cash is on the decline, here are some ways you can make sure you’re getting the most out of your card.

Whether you’re paying for your morning coffee, picking up your lunch or grabbing a bus ticket, these are all everyday transactions that you probably used to use your loose change for. These days though, you’re more likely to see people tap and go on these small purchases rather than rifle through their wallet to find change.

Senior Reserve Bank of Australia (RBA) official Tony Richards says that the decline of cash has been occurring steadily over the years. A 2013 survey conducted by the RBA revealed that only 47% of all transactions involved cash, down from 70% in 2007. Similarly, the number and value of ATM cash withdrawals (the main method individuals use to obtain cash) fell by 5% and 2% respectively in 2014/15.

Meanwhile, card use is on the rise. Over 2014/15, Australian personal and business cardholders made around 6.2 billion card payments worth $503 billion, an increase of 11% and 7% respectively in comparison to the previous year. Australians made around 400 non-cash transactions each during this period, with two-thirds of these being card payments.

The RBA attributes this increase of card use to consumer adoption of technologies such as contactless card payments, which like cash, offer relatively quick transaction times. Growth in online commerce is also a likely factor, with many everyday transactions occurring online rather than in person.

Share of number of payments made in cash

The RBA doesn’t completely discount cash though, noting that it’s still widely used for low-value transactions. In fact, Richards says banknotes on issue have increased by 7% over the last two years. It’s hard to know exactly why this growth has occurred, though the RBA thinks it could be attributed to a demand for cash following the global financial crisis. Given that the GFC occurred over seven years ago now, it could just be because people still like the convenience of cash.

The RBA also found that the older you are, the more likely you are to carry cash. Older participants also generally carried more cash than younger people. The 2013 survey revealed that participants aged 65 years and over usually held $80 more than individuals aged between 18 and 24 years and $60 more than those aged between 35 and 44 years. Given that contactless payments have only been introduced in the last few years, it’s no surprise that younger people are more inclined to have adopted the new payment method more than cash.

4 ways to get the most out of your card payments

While contactless payments are probably the most convenient way to make purchases, unlike cash, they come at a cost. To make sure that your card transactions aren’t costing you more than they should, consider the following the next time you pay on plastic:

  1. Interest. If you’re using a credit card for everyday purchases, consider looking at one with a low or no interest promotional period or interest-free days on purchases. The promotional interest offer will only last for the length of the introductory period and you’ll need to pay your balance in full at the end of the statement period to take advantage of the interest-free days. However, these features are still a good way to keep your interest costs to a minimum and ensure you’re only repaying what you’ve spent.
  2. ATM withdrawals. Avoid using your credit card for ATM withdrawals. Credit cards aren’t designed for these transactions, so you’re likely to incur a high cash advance fee immediately if you use your card for withdrawals. If you want to keep your card costs to a low, save the withdrawals for your debit card.
  3. Merchant surcharges. The Turnbull government has vowed to put an end to credit card surcharges this year. Until the legislation is enforced, they’re still something you should be wary of. Some retailers charge up to 20 times more than the 0.5% cost it takes to process a card payment. Merchants usually advertise if a surcharge applies, so make sure to confirm what this is before approving the payment.
  4. Annual fees. Unlike cards, you don’t need to pay an annual fee when using cash for everyday transactions. Some credit cards offer no annual fee, but others can charge well into the hundreds. Make sure that the value you receive from the card outweighs the cost of the annual fee.

With the wide use of contactless payments and introduction of Apple Pay and Samsung Pay in Australia, it’s likely that our dependence on cash will continue to dwindle. As paying with your card usually comes at a cost, it’s wise to compare the fees and features to ensure that you’re not paying more than you should on everyday purchases.

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