It’s been calculated that the aggregate expense to all households in the United States for accessing and using their Cash is $31 billion a year. This astounding number includes the 5.6 hours each year, on average, that people waste simply driving to the location where they get their cash and also $6 billion in foreign ATM fees. Throw in another $5 billion in period account fees and don’t forget the 500 million that’s stolen every year either and you can see that using cash is actually rather expensive.
The old saying “Cash is King” might still hold but, for what most people are paying just to use it, it might be time to change it.
Even worse is that many of the costs that people face to use cash are increasing, such as foreign bank fees. The Government Accountability Office reports that between 2007 and 2012 the cost to use a foreign ATM has gone up over 20%, bringing the average cost to $2.10. Wells Fargo Bank actually charges $5.00 in ATM fees if you don’t have an account with their bank.
Because of these costs and also because electronic payments have become so popular, cash is used in only about 20% of consumer spending today. Although it does come with these extra expenses, there are still a lot of good reasons to use cash including the fact that there are still a few businesses that only take cash and, in some cases, offer a financial incentive to use it. Credit cards and other cash alternatives can also cost more, especially if they have a balance. These have gone up, no doubt, but Greg McBride, senior financial analyst for Bankrate.com, says that there are still a number of ways to avoid the high cost of cash even if you can’t get around using a regular bank account completely.
Free checking accounts, or accounts that offer free checking with minimum balances or direct deposit, are one alternative. Indeed, over 95% of all bank accounts don’t even have a monthly fee as long as you meet their conditions for monthly minimums and using direct deposit. Knowing exactly types of fees that your bank charges is also really important as the average checking account has over 30 different fees and, in some cases, as many as 50!
Another thing to keep in mind is that using credit cards actually offers certain specific protections to consumers, including limited liability for any charges made if your credit card is stolen. Cash is not afforded this protection, which is a very big drawback.
If you always pay your balance is in full every month, a “rewards card” may be an excellent choice for you. Paying your bill off in full every month is vital however because, if you don’t, your rewards card may cost you more in fees than any rewards that you might receive.
There are better travel and cash-back rewards as far as CardHub.com is concerned. They did an analysis recently and found that, for example, Chase Sapphire Preferred Card offers $400.00 cash back if you spend $3000. during the first 90 days that you have the card. Barclaycard Arrival World MasterCard will give you travel credits to the tune of $400. if you spend $1000. in the same time period.
The reason these cards are offering such amazing rewards and cash back is that they are doing everything they can to attract consumers with the lowest credit risk and, frankly, they have a lot of competition. If you’re keen on figuring out which cards reward you the best or give you the most cash back, CardHub.com and NerdWallet.com (among others) offer services online to help you compare offers and cards.
The bottom line is that, while it’s nearly impossible to avoid all of the costs of using cash, there are a number of ways to do it cheaply as well as a number of alternatives to cash that are inexpensive and, in some cases, can actually earn you money. Your best bet to determine what’s best for you is to do your research, ask questions and be aware of the extra fees and costs associated with whatever type of payment you’re using, whether cash or credit.