November 23, 2020 | By: Christopher Northey

How to Stick to a Budget in a Cashless Society

Budgeting | Credit Cards

The signs were there, but today, it’s becoming more and more evident: the world is turning into a cashless society. Now, businesses are switching to cashless and contactless payment options, accepting only credit or debit cards. Of course, This can pose a big problem for some Canadians. Not all of us have access to credit cards, and some of us don’t use them in order to stay out of financial trouble.

What Happened to Paying with Cash?

In 2019, Global News revealed that an overwhelming 85% of Canadian consumers are regularly paying with credit card or debit card. In other words, only 15% of retail consumers regularly pay with cash.

“You constantly hear of consumers that have no cash on them and may not have cash for days because of how easy it is to tap a debit card or a credit card,” explains John Graham, director of government relations for the Retail Council of Canada.

While some businesses only accept cash because of the fees they have to pay banks on credit or debit transactions, this is becoming increasingly rare. Most businesses do enough volume to negotiate low transaction fees, making the convenience of accepting credit and debit transactions well worth it. By accepting only cashless payments, stores also reduce or eliminate:

  • Clerical errors
  • Transaction times
  • Robberies
  • Employee theft
  • Bank drops

COVID-19 and the Cashless Society

In early 2020, when COVID-19 happened, the world was given an even greater push toward becoming a cashless society. In the rush to sanitize everything, people began to fear transmitting the virus through money, turning to credit and debit cards.You have probably seen signs in windows stating, “No Cash Payments, Please.” The World Health Organization was even often misquoted as stating cash could transmit COVID-19, which they have denied: 

“WHO did not say banknotes would transmit COVID-19, nor have we issued any warnings or statements about this,” WHO spokeswoman Fadela Chaib told MarketWatch. “We were asked if we thought banknotes could transmit COVID-19 and we said you should wash your hands after handling money, especially if handling or eating food.” 

Of course, people hear what they want to hear, and so contactless payment became more widely adopted. “Contactless is the fastest, easiest, and safest—and as announced by the World Health Organization—the healthiest way to pay,” stated Michael Miebach, Mastercard’s president and CEO-elect.

What is Contactless Payment?

Contactless payment literally means no swiping a card and no inserting a card with a chip; instead, you simply hold your payment method over a card reader to complete the transaction. The two main forms of contactless payments are a credit or debit card with the technology embedded into it, or a mobile wallet app that’s scanned through a smartphone. 

It’s important to understand that the payment terminal will need to have near-field communication (NFC) capabilities to work, so contactless payment isn’t possible on older readers.

In a Mastercard global consumer study, which included 1,000 Canadian respondents, nearly 80% say they use contactless payments. The majority of respondents view contactless as the cleaner way to pay, and believe contactless payments are up to 10 times faster than other in-person payment methods. So, even in a post-pandemic world, it looks as if contactless payments are here to stay.

Can a Business in Canada Refuse Cash?

You might be thinking, is it illegal for a store to refuse cash? How can a store refuse legal tender in Canada? “No law requires anyone to accept bank notes or any other form of payment to settle a commercial transaction,” explains Josianne Ménard, Senior Media Relations Consultant at Bank of Canada. “While the term ‘legal tender’ describes the money approved in a country for paying debts or settling commercial transactions, it does not force anyone to accept that form of payment.” 

Despite this, in a recent statement, the Bank has strongly advocated that retailers continue to accept cash to ensure Canadians have access to the goods and services they need, understanding that refusing cash purchases may put an undue burden on those who depend on cash and have limited payment options.

How to Stick to a Budget in a Cashless Society

Are cashless payments creating more debt? While we haven't seen any conclusive studies, many of our clients are concerned about going cashless. For many people, cash is a great way to keep their spending in check. However, as the times change and the country becomes increasingly cashless, it’s important to set yourself up for success without relying on loonies or bills.

Use a Budget Planner

It’s easy to go over budget when you’re using your credit card; it keeps letting you spend, as long as you don’t max it out. The best way to avoid overspending is to organize your spending by creating a monthly budget. With a budget, you’ll have a clear view of what’s coming in and what’s going out which can help you better plan your spending throughout the month and/or make decisions on where to cut back. Download our free Budget Planner + Expense Tracker.

Track Your Spending

It is a great idea to track your spending no matter what method of payment you choose. If you’re using a credit or debit card, one benefit is that you can simply log into your account, often through an app, to see every purchase you’ve made. By tallying up your spending in discretionary categories like dining and entertainment (many cards do this for you) you’ll have a better idea, based on your budget, you’re getting close to reaching your limits. Once you reach those limits, put away the card!

Set Up Credit Card Notifications

Notifications are the “secret weapons” of successful credit card users! There are three main notifications you’ll want to set up. Once you’ve done this, the bank will notify you via email or a text message. The three you need are:

  • Bill due notifications. Paying a credit card late can result in a late fee and an annual percentage rate (APR) hike. Don’t risk forgetting to pay; set up a notification. You might also set up an auto-pay with your bank account.
  • Balance notifications. Before you get too comfortable with your credit card, why not set up a balance notification? This will let you know when you’re beginning to approach your credit limit so you can tap the brakes on your spending.
  • Spending notifications. These notifications send you a message each time you make a purchase. Sometimes, they may question the purchase (Did you really tip 40%? Did you make the same purchase twice?) to help identify fraud. These are also helpful when you have an authorized user on the card.

Pay Your Credit Card Off Several Times a Month

Most of us get paid weekly, or bi-weekly. So why wait a month to pay a credit card bill? Spending can really get out of control if it’s not carefully monitored. There is no penalty for making an extra payment, so every two weeks, pay off the balance. It’ll keep you honest about your spending and ensure no late fees!

Use a Prepaid Card

Do previous bad experiences or horror stories from friends have you just plain leery of using a credit or debit card? You can still flash plastic, without the worry by using a prepaid card. 

There’s no applying for credit. Instead, you simply purchase the card from any grocery store or pharmacy and load it with your own money. Then, when you use the card, the dollar amount of your purchases gets deducted from the balance. 

Once you’ve spent the total balance, the card will not work again until you reload it with more money. Interested? Read more in our recent blog: Prepaid Credit Cards vs. Secured Credit Cards: What’s the Difference?

Going Cashless But Being Careful

It used to be, stores wouldn’t accept credit cards. Now, many of us are instead asking, “Do you accept cash?” While it is possible to get by without credit cards, despite our best intentions, credit cards can get us into trouble. 

If you’re struggling with money management and budgeting, and our new cashless society has you more concerned than ever about your finances, contact the experts at Credit Canada for help and support. All of our counselling is free and completely confidential! You can book a free phone appointment today with one of our certified Credit Counsellors by calling 1.800.267.2272.

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