Cash Pros and Cons (2024)

Everyday Money

March 14, 2024 - Benjamin Manz

Cash is still a very popular payment method in Switzerland. Here, independent online comparison service moneyland.ch lists the most important advantages and disadvantages of cash.

Digitization is increasingly affecting the way we pay for goods and services, and the coronavirus scare will likely add to this trend. Using debit cards, credit cards and mobile wallets to settle payments is becoming more common in Switzerland. The vast majority of “money” is already in the form of digitally-recorded account balances.

Calls to abolish cash are increasingly being sounded by commercial banks, some economists and even by some central banks. The independent online comparison service moneyland.ch does not agree with that position. Cash, like other payment methods, has a number of important advantages in addition to its disadvantages.

The advantages of cash:

1. Privacy

Cash payments offer far greater privacy than other payment methods. Transactions performed using credit cards, prepaid cards and debit cards are recorded by the financial institutions involved. Mobile wallet transactions are recorded by tech giants like Google and Apple in addition to financial services providers. In many countries, the state can also access transaction information at any time. The privacy offered by cash is a factor which annoys many governments.

2. Independence from commercial banks

The balances of bank accounts, prepaid accounts and digital wallets are simply a debt claim against the bank or other financial services provider. In the event of a bank failure, this “digital money” may be partially or fully lost. Although Swiss commercial banks have a depositor protection scheme, this scheme only insured up to 100,000 francs per customer and bank. Additionally, the maximum protection provided by the scheme is eight billion francs for all Swiss bank customers combined.

Cash, on the other hand, is legal tender and not a debt claim against a commercial bank. You can easily store it in a bank safe deposit box, in a non-bank safe deposit box, or in a secure safe at home.

3. No negative interest

Negative interest rates have also been charged on private and savings accounts in recent years. In the meantime, the situation has eased again with the rising interest rate level. However, depending on how interest rates develop in the future, negative interest rates might be applied to accounts with small balances. In the case of more comprehensive negative interest rates, it is feared that many savers could simultaneously withdraw their deposits as cash. Some central banks cite the need to enforce negative interest charges as a reason to abolish cash. However, it is possible for governments to create artificial disadvantages to holding cash rather than account balances – and these measures could negate this benefit.

4. No online theft

As digitization has progressed, cybercrime and online fraud has progressed as well. Swiss bank and credit card accounts are regularly the target of cyber criminals and fraudsters. Cash can be physically stolen at one location, but “digital money” can be stolen from anywhere, at any time.

5. Less overspending

Debt counselors recommend only carrying cash, and only the exact amount of cash budgeted for your immediate purchases. In this way, you avoid impulse purchases because spending is limited by available money. Numerous studies have shown that consumers spend more when using digital payment methods than they do when spending cash. Credit cards pose an additional risk for consumers by enabling payment on credit, which often results in debt.

6. Low costs for merchants

Payment networks like Visa and Mastercard, merchant acquirers like Worldline and card issuers all charge fees when you use your card to pay. These interchange fees must be paid by the shops, restaurants and other merchants which you make purchases from. To varying degrees, merchants pass on these extra costs to customers by working them into price tags. There is a cost for businesses to handling cash, but for smaller businesses in particular, cash handling costs are generally lower than the merchant fees charged by digital payment service providers.

7. Crisis-resistance

Banknotes and coins can be used for commercial transactions even when technical problems, cyber-attacks, and/or disruptions to power supplies or telecom networks render other payment methods unusable. Many governments – including the Swiss government – recommend keeping an emergency supply of cash in small denominations at home in case of disruptions to cashless payment services, banks and ATMs.

The disadvantages of cash:

1. Hygiene concerns

Coins and banknotes exchange hands often. The coronavirus scare has once again thrown the concerns about cash and hygiene into the spotlight. It is technically possible for microorganisms to survive on banknotes and coins for limited periods of time. An increasing number of people consider cash to be unhygienic. Naturally, microorganisms are also present on payment cards and smartphones, but contactless technology has made transmission less likely.

2. Risk of loss

Cash can be lost or stolen fairly easily. Of course, smartphones and payment cards are easily lost or stolen as well, but mobile wallets are difficult to access and you can have your card issuer freeze your account to prevent fraudulent use.

3. Less convenience

Large amounts of banknotes and coins take up a fair bit of space compared to a payment card. A smartphone is a lot bulkier, but the majority of consumers now carry a smartphone with them anyway. Additionally, making contactless payments with a smartphone or card is typically faster and easier than paying with cash.

4. More complicated currency exchanges

Exchanging money for foreign currencies in cash requires more effort than digital payments in which card issuers automatically handle currency exchanges. Additionally, the fees charged by Swiss banks and foreign money changers are often high. It is important to note that digital payments (like credit card transactions) in foreign currencies typically command high foreign transaction fees as well. However, a number of app-based financial services now relatively low fees for in-app currency exchanges and card payments in foreign currencies.

5. Undeclared money and counterfeiting

A widely-sounded argument for the abolition of cash is that it can be hoarded by criminals – in the form of 1000-franc notes, for example. It is also argued that taxpayers can avoid taxes by illegally refusing to declare cash income or wealth. Additionally, it is technically possible to counterfeit banknotes and coins. In practice, criminal organizations have long been moving away from cash to digital assets (including cryptocurrencies like Bitcoin) and non-cash physical assets.

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Cash Pros and Cons (2024)

FAQs

Cash Pros and Cons? ›

Pros and Cons of Cash

What are the pros of cash? ›

There are certain advantages to using cash, such as:
  • you only spend what you have.
  • you don't pay interest or fees.
  • you may get a discount since merchants don't have to pay a fee to accept cash transactions.
  • it may be faster and easier than other payment methods.
  • it doesn't require equipment, internet or electricity.
Dec 13, 2023

What are the cons of money? ›

A great disadvantage of money is that its value does not remain constant which creates instability in the economy. Too much of money reduces its value and causes inflation (i.e., rise in price level) and too little of money raises its value and results in deflation (i.e., fall in price level).

What are the benefits of cash only? ›

You Avoid Fees and Charges

While you may pay the same price for a product or service, whether you are paying cash or credit, with a cash only purchase, you won't have to pay the additional charges often associated with credit cards.

Why is cash a good thing? ›

Cash allows you to keep closer control of your spending, for example by preventing you from overspending. It's fast. Banknotes and coins settle a payment instantly. It's secure.

What are the pros and cons of no cash? ›

In addition to simply eliminating the costs and hassles of managing currency, going cashless may also reduce certain types of crime. The downsides of going cashless include less privacy, greater exposure to hacking, technological dependency, magnifying economic inequality, and more.

What are the risks of cash? ›

However, holding too much cash beyond emergency funds or short-term needs may be dangerous. At the highest level, it could lead to significantly less wealth over time. Since 1928, U.S. Stocks have outperformed cash in 68% of the calendar years.

Is it worth having cash? ›

Investing gives you a better chance to grow your money in the long term. Once you're putting money away for 5 years or more, cash is rarely the best option. Inflation is the general rise in prices of the stuff we pay for every day. The cash we have today won't have the same buying power tomorrow.

Why is cash negative? ›

Negative cash flow is when your business has more outgoing than incoming money. You cannot cover your expenses from sales alone. Instead, you need money from investments and financing to make up the difference. For example, if you had $5,000 in revenue and $10,000 in expenses in April, you had negative cash flow.

What are the five advantages of money? ›

Having money makes it possible for you to start a business, build a dream home, pay the costs associated with having a family, or accomplish other goals you believe will help you live a better life. Money gives you security.

What are the negative side of money? ›

feeling angry, fearful or experiencing mood swings. tiredness, aches and pains. withdrawing from others. feeling guilty when you spend money.

What problems does money cause? ›

Money problems can affect your mental health

Certain situations might trigger feelings of anxiety and panic, like opening envelopes or attending a benefits assessment. Worrying about money can lead to sleep problems. You might not be able to afford the things you need to stay well.

What is a disadvantage of cash? ›

Less Secure. Cash is less secure than a credit card. Unlike credit cards, if you lose physical money or have it stolen, there's no way to recover your losses.

Is it smart to use cash? ›

There is also a practical security advantage with cash. Although debit and credit cards often have personal identification numbers (PIN) and chips for extra security, there is less risk of identity theft or your information getting stolen online when using cash.

Why is all cash good? ›

However, accepting an all-cash offer can speed up the process significantly, since you don't have to wait on lender underwriting and approval. Plus, all-cash offers are less likely to fall through, since your buyer isn't relying on a loan application that could be denied.

What are the benefits of keeping cash? ›

Reasons people keep cash at home include emergency preparedness, financial privacy concerns and mistrust of banks. It's a good idea to keep enough cash at home to cover two months' worth of basic necessities, some experts recommend.

What are the pros of working for cash? ›

In cash jobs, you are not bound to a specific schedule. This means that you can work whenever it's convenient for you and take time off whenever necessary. The cash job employer will probably not ask about your personal life or how much leave time you need because you aren't bound by a written contract.

What are the advantages of the cash system? ›

Advantages of the cash method

Here, you simply record transactions when you pay or receive cash. All you need is accounting software for small businesses, and you're good to go. Offers a clear picture of the cash flow: Cash accounting makes it easy to manage your business your business cash flow.

What are the pros and cons of holding cash? ›

This can be both its strength and its weakness. During bull markets, holding too much cash can limit returns, while during market busts, cash can provide a cushion. While past performance doesn't guarantee future results, cash has been shown to underperform assets like equities and bonds over the long term.

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