Could living in a cashless society put you in debt?

Many of us default to using credit and debit cards for the sake of convenience….

Could living in a cashless society put you in debt?

Many of us default to using credit and debit cards for the sake of convenience. But in the wild world of COVID-19, some say we’re moving toward a totally cashless society at an accelerated pace. 

And not everyone’s against that kind of change (no pun intended). Tommy Pederson of Albertville, Minnesota, for instance, would welcome the shift. As someone who works in a variety of chain restaurants to support himself through school, he’s felt uncomfortable with cash ever since the pandemic started. 

Although even plastic payments aren’t risk-free, they’re a lot more “contained” than cash, Pederson said. The dollar bills in a fast-food register travel from the till to the manager’s office to the employees’ pockets as tips, all posing transmission risk. 

“It’s something we’re scared of,” he says. “You can’t really wash dollar bills.”

That said, plenty of other folks are far more afraid of what a truly cashless society could wreak on vulnerable people than they are of cash itself. The unbanked and underbanked, for instance, could run into trouble — and these are disproportionately people of color.

And on a purely personal level, it’s easy to worry that paying primarily with digital dollars could quickly lead to a debt spiral.

So what would a cashless society really look like? And how close are we to taking the plunge?

How would a cash-free society work?

As the phrase implies, a cashless society is one in which some form of currency other than physical cash is used as a method of payment. In our contemporary world, the cashless concept includes debit and credit cards, but also the increasingly popular swath of mobile payment options, like Venmo. 

Perhaps because of the convenience and efficiency of these payment methods, which take much less time than flipping through a wallet of bills, our culture has been trending away from cash for a while now. In 2019, only 26% of payments were made in cash in America, according to the FDIC’s 2019 Diary of Consumer Payment Choice. Debit cards were the most-used payment method, accounting for 28% of payments, and credit cards came in third at 23%.

Although Americans seem more reticent to adopt mobile payment platforms than folks in Asia and northern Europe, the U.S. mobile payment market still increased significantly from 2018 to 2019 — a growth from $69.8 billion to $98.8 billion, or 41%.

Along with being more efficient for consumers, the cashless life can benefit businesses, too — especially, as Pederson noted, during a pandemic. A variety of storefronts have begun refusing cash or strongly encouraging cashless transactions in the wake of COVID-19, augmenting a trend that began well before the virus landed.

But since the cashless requirement puts pressure on those without credit cards or bank accounts, it’s been banned outright in some places, such as Philadelphia.

All of which is to say, it’s definitely still a controversial issue.

The pros and cons of a cash-free life

So what do proponents and detractors have to say about the cash-free life? 


  • Digital payments are more secure than cash, which can easily be lost or stolen.

  • Digital transactions are, in many cases, faster than cash payments, speeding up the process for both consumers and merchants.

  • Some businesses say running cashless operations reduces their costs, as cash-handling expenses can be high.

  • As COVID has made clear, cash is yet another potential surface for contamination and disease transmission.

  • Some even see a cashless lifestyle as one that could reduce corruption and organized crime.


  • As mentioned above, requiring cashless payments can be seen as discriminatory because it leaves out those who are unbanked, underbanked, or unable to acquire credit cards, many of whom are minorities and/or those with low socioeconomic status.

  • Although some businesses say running cashless would reduce their costs, others — particularly small businesses — could face cuts in profit due to interchange fees levied on card-based transactions.

  • With digital currencies, data breaches are a concern — and some consumers express unhappiness with the traceability of cashless transactions. The cost of increased security measures on the merchant end could also be passed on to the consumer.

Will living cash-free lead me straight into debt?

One of the most common concerns on the consumer end about a cashless society is how quickly it could put the average person into debt. Simply swiping a card can make you feel disconnected with your purchase; however, studies have shown that paying with cold, hard cash comes with the biting realization that you’re actually spending your money. Not having the option for that reality check may lead some to keep swiping, and spending, well beyond their means.

This is especially true with credit cards because they act as an advance on money you may not actually have yet, meaning you could spend years chipping away at debt that comes with a relatively high-interest rate. In fact, the average U.S. household already carries $5,700 in credit card debt. Falling behind on these payments can impact your credit score, which will make it harder to qualify for other loans, like mortgages or auto loans, down the line.

While it seems we’re a while away from entering a truly cashless society, if you do find yourself in credit card debt, you have some options.

  • Consider debt consolidation or a balance transfer. These methods involve taking out another line of credit in order to collate multiple debts into one payment, which can both simplify and lower monthly payments and potentially help you save money on interest over time. You’re not alone in considering this option, as 50% of credit cardholders have reported applying for a balance transfer to move around debt. 

  • Get up close and personal with your budget. Finding ways to cut expenses can give you a leg up on funneling “extra” money towards your debts.

  • Create a targeted repayment approach. Common tactics include the “snowball” method, where you start by focusing on the lowest balance and work your way to the highest, and the “avalanche” method, where you tackle the debt with the highest interest rate first and work down the list from there.

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