Cash Versus Debit Cards: US Consumer Digital Payments

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While the long-standing debate has been concerned with contrasting the benefits and limitations of credit and debit cards, the comparison between cash and debit cards has not been as prevalent because using cash has the same financial implications as debit cards. Nevertheless, the monetary impact and the psychological processes that occur when money is being spent can differ between the two. The aim of this paper is to compare and contrast the use of cash versus debit cards in one’s everyday spending activities and find a ‘winner’ between the two based on the further analysis. The preliminary argument is that even though there are some advantages of using cash, in the current highly-digitalized environment, electronic money transfers are much quicker and more convenient.

Debit cards were created for convenience for replacing check-based transactions. The first debit card was issued by the First National Bank of Seattle to business executives that had large savings accounts. The cards took the role of check signatures and guarantee cards, promising that the bank would cover each transaction without the need for a check to complete it. Modern debit cards are easy to use on an everyday basis because their holders can swipe them without having to think about any additional things. The cards are convenient for withdrawing cash from an ATM in case of need and other emergencies.

In addition to convenience, debit cards do not imply any annual fees and do not charge interest, which means that using them is almost the same as using cash when it comes to financial implications for their holders. Despite the rate at which a holder uses their card, whether rarely or frequently, they do not have to pay any fees to keep it activated, even though checking accounts may include monthly fees. Because the payments made using credit cards take the money directly from a bank account, there is no balance being accumulated on which one has to pay interest. Therefore, any small fees that may be linked to using debit cards are linked to the services provided by their banks. The downside of debit cards is that they allow for spending more than expected because the money available in the bank account does not seem tangible. People may not initially think about how much they are actually spending and find out later when they check their accounts. This means that the awareness of one’s spending when using debit cards entails careful planning and budgeting.

Some financial experts suggested that with cash, a person may spend less because paper money is more tangible and it is more noticeable when it goes away. Specifically, it is more noticeable when less money is present in one’s purse or wallet, which prompts limiting spending right away (Gravier). In addition, carrying cash is often a good idea in cases when emergency purchases need to be made in places where vendors do not accept cards. However, always carrying cash is a generational habit as older people tend to adhere to it due to the lack of ‘belief’ in modern ways of making payments.

On the downside, using cash leaves no record of transactions on the side of the user besides receipts of purchases. If a person wants to get a loan or apply for a mortgage, the benefits of using cash are equal to zero. While there is nothing wrong with using cash in an effort to control one’s spending and enhance financial planning, it is important to diversify spending habits to keep the purchasing options open. Choosing only cash can limit spending opinions and keep a person from reaching the desired level of financial wellness.

The comparison between using cash versus credit should include a discussion about the popularity of e-commerce and such IT solutions as Apple Pay or Google Pay that are widely available. Online purchases are now considered a staple but entail paying in advance with a preferred online method of payment, which means that cash is no longer an option. While credit cards are also widely used for online shopping, debit cards remain popular among holders who use them for purchasing anything from groceries to an assortment of products on Amazon (Goel et al.). Cash is rarely used in payments made online because companies want a guarantee that their customers will fulfill their responsibilities when making a purchase. Of course, returns of funds, if such are to occur, are made to the card that was used to make initial payments.

To conclude, debit cards represent a favorable option for payment in modern times because they open more opportunities compared to cash. Even though carrying around some paper money can be helpful in some situations, debit cards are now available as applications in one’s smartphone, making them very easy and convenient to use in a majority of locations both domestically and internationally. Therefore, this comparison shows that some disadvantages of debit cards are outweighed by their benefits, especially in the modern and highly-digitalized context.