Avoiding the Dangers of a Cashless SocietyPosted May 8, 2014 in Personal Finance
Card cards offer a convenient way to make purchases and earn rewards points – as long as they’re used responsibly. That means paying off your credit card balance in full each month.
Credit cards have been steadily growing in popularity for years in Canada. When it comes to paying for goods and services with plastic, we rank among the highest in the world. In 2012, cashless transactions totaled just over 9.9 billion – with credit cards making up 32% of those transactions and debit cards at 44%. (Source: CPSS – Red Book Dec 2013) This is compared to an average of 40 per cent for all card use worldwide in 2009.
Paying for goods and services is easier than ever today. You can tap or swipe your credit card and spend $20 – or $200 – in an instant. Although credit cards offer a quick and easy way to make purchases, it’s easier than ever to overspend and end up with a hefty credit card balance owing at the end of the month if you’re not careful.
Contactless Payments: The Way of the Future
There’s no denying contactless payments are the way of the future. Major credit card issuers like MasterCard and Visa have hopped on board the bandwagon with their own versions. You can now even pay by contactless debit with Interac Flash Services.
Instead of inserting or swiping your credit card, you can wave your MasterCard PayPass or Visa payWave; the purchase is then authorized, processed and billed in one fell swoop – no signature required! Canadians can’t seem to get enough of contactless payments; since 2005, over 240 million transactions have been made by MasterCard PayPass in Canada, the highest of any country in the world. MasterCard also says 1 in 10 store purchases are now made with a PayPass-enabled credit card. (Source: MasterCard PDF)
The retirement of the penny seems to have only increased the trend from money towards credit cards. According to a survey from Leger Marketing, seven in 10 (71 per cent) Canadians are comfortable with never handling cold, hard cash again; that’s a huge jump from 2011, when only a quarter (27 per cent) of Canadians felt that way.
Parting is Such Sweet Sorrow
A cashless society makes purchases seamless, but it comes at a cost. It’s easier than ever to let your spending spiral out of control. With PayPass, you don’t even have to sign a receipt for purchases under $50.
Think about it this way: if you had to pay for that $40 DVD set in two crisp $20 bills, or with the quick flash of your MasterCard, which do you think would seem more costly? Although you’re spending the same amount, we’re willing to bet you’d be more likely to stop and think about your purchase if you were paying by cash.
Tips for Keeping Your Credit Card Spending Under Control
With temptations to spend at every turn, it can be alluring to simply “swipe it and forget it.” Here are some tips to help you not give into that urge to overspend and remain responsible.
Cooling-Off Period: Most retailers would like you to make purchases without a second thought, but before you swipe your credit card you should give yourself a timeout. Unless a sale is ending today, there’s no hurry – you can always go home and sleep on it. Perhaps you’ll realize you don’t need that third flats screen TV after all.
Avoid Your Triggers: Temptation can be hard to fight. When you’re on a diet, you shouldn’t keep sweets in your home. The same can be said for credit cards; if you end up overspending at the mall, you should try to avoid it or at least consider paying in cash. Although you may enjoy spending in the moment, you won’t be so happy when you receive a statement you can’t pay for in full.
Visualization: Visualization is a powerful technique used by star athletes. A star basketball player may envision themselves hitting a game-winning three-point shot before the buzzer. With credit cards the idea is the same; imagine the moment you’ll receive your credit card statement. Will you be happy with what you see? If the answer is no, you should seriously consider rethinking your decision to purchase those extra pair of sneakers.
The Bottom Line
We’re not saying paying by credit card is a bad thing. There are still plenty of benefits from a cashless society you can take advantage of without going broke. Credit cards offer plenty of perks, including convenience, reward points, and improved cash flow, when used responsibly.
Before every credit card purchase – big or small – you should stop and think for a moment to make sure you’re not living beyond your means. This will help bring back the pain of spending lacking from credit card purchases. Although convenience is nice, it can have a steep price tag if you swipe your credit card without a care in the world.