The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.
There’s an open question on the debate between credit cards and debit cards. But, let’s throw a monkey wrench into the conversation, and add cash to the mix.
There are at least eight reasons to always carry cash, no matter how convenient plastic may be, or what benefits it may offer.
1. In case your credit or debit card is denied
There are a number of reasons why a credit or debit card can be denied. Though the most likely reason is insufficient cash on a debit card, or a maxed-out line on a credit card, those are hardly the only reasons. Here are some others:
- A merchant’s card reader may be malfunctioning.
- There could be a technical problem with the issuing bank.
- There could be a problem with the merchant’s bank.
- Your card may be damaged and unreadable – a deactivated magnetized strip is hardly uncommon.
- There could be a mysterious computer glitch anywhere in the process.
- A general power outage could shut down everything.
Having some cash in your wallet, or at home, could come in handy in any of these situations.
2. Giving to a homeless person or charity collection
How many times have you come across a homeless person or someone collecting money for charity, but found yourself unable to give because you have no cash in your wallet? That’s the kind of thing happens when we become completely reliant upon plastic to pay for everything. Opportunities to give will be blown for a lack of a small amount of cash.
3. Spitting a bill at a restaurant
If you have ever been out to dinner with family or friends, and one of them paid the entire meal on plastic, splitting the bill after the fact can be very difficult unless you have cash. Sure, you can get around this easily if each party puts up a credit or debit card at the time of payment. But sometimes in the confusion of the moment, one person puts out their card in an attempt to keep things simple. If you have no cash to pay your portion, that can lead to an uncomfortable situation of leaving the restaurant owing someone money.
4. The gas station dilemma
Many gas retailers have a minimum balance requirement in order for you to pay at the pump with a debit card. It is very typical for example for a gas station to require a minimum balance of $100 in your account in order for you to use the pump. This is likely because the computer does not know how much the sale will be when you begin the transaction – it has to make the worst-case assumption, and $100 will generally cover the largest sale possible. If you only have $95 in your account, you will be unable to pay at the pump.
You can get around this is simply by using your credit card – but who wants to spend the next 10 years paying for gas in a tank that will be empty in a week? You can also go to the attendant and swipe your card for a flat amount, but that’s no more convenient than paying with cash.
5. Tolls and vending machines
Toll takers and vending machines generally don’t take credit cards. If you live in an area with toll roads, or work in a place where vending machines might be the only source of nourishment between meals, having some cash in your wallet will be an oasis in the desert.
6. There are still few places that only take cash
Even in an increasingly cashless society, there are still a few places out there were you can’t pay with plastic. Some examples include street vendors and fruit and vegetable stands. This is also quite typical at fairs and street festivals. While you may find some merchants and vendors will accept plastic, there are still many who work on a cash only basis. Still another place is garage sales – they don’t take plastic, and if they’re smart, they won’t take checks either.
7. If you have kids
If you have kids, you must have cash – period. Even if your child already has a credit or debit card, there are always situations were they need cash. It might be a minor purchase at school, a school related collection effort, or a school fair. Credit and debit cards won’t work in these situations, and you can’t be writing checks for every little thing that happens.
In addition, if the kids want go out with their friends – to go to the movies, bowling, or even just to the mall – you probably won’t hand them your credit card, and checks won’t do them any good. You’ll have to have some cash on hand to fork over, and usually on very short notice.
8. Minimizing identity theft
I’ve saved this for last because it may be the most important.
Every time you make a purchase using a credit or debit card, a paper trail is created. That is an open opportunity for identity theft, particularly since much of it is perpetrated by employees who have access to the trail. You can minimize the chance of identity theft by at least making small purchases in cash, rather than by plastic. Identity thieves hate cash!
How much cash should you carry?
The answer to this question will be different for everyone. Much depends upon what your situation is – for example, how frequently you encounter tolls, how many kids you have, and how likely you are to frequent vendors who only accept cash.
For most people who fall somewhere in the middle, carrying $50-$100 in cash in your wallet will get the job done. Alternatively – to minimize the damage from the theft or loss of your wallet – usually $20-$30 in your wallet, while keeping $100 or so at home.
And whatever you keep either in your wallet or at home, should be held in small bills. A $100 bill will do you little good at a vending machine, or if one of your kids wants $20 to go to movies.
How about you all? Do you carry cash, or do you prefer to go completely cashless? If you do carry cash, how much do you think is enough?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/jmrosenfeld/2903513401/sizes/n/in/
