How to prepare for a cashless society


Cash has been around since the Roman times, but could there come a time when we no longer use physical money?

If it were up to some retailers, the answer is yes, though we're still years away from ditching bills and coins.

With each passing year, Canadians are making fewer transactions in cash, instead opting for credit cards, mobile payments and more recently, cryptocurrency such as Bitcoin.

"It's becoming easier to pay without actual money," Judith Cane, money coach, said in an emailed response to questions. "More retailers are accepting credit cards and other payment methods. Contactless payments are also making it easier to ring up your purchases in an instant."

While there's no denying a cashless society is more convenient, there are new risks, too. Here are the benefits - and pitfalls - of going totally cashless.

The upside of going cashless
In the past, some retailers may have refrained from offering credit card payments as an option, to save on interchange fees. The opposite is happening now: some retailers are shunning cash.

"Many people don't realize that there's a direct cost for retailers handling cash," Noel D'Souza, money coach at Money Coaches Canada, said in an emailed response to questions. "By going completely cashless, not only does it save time, but it can lead to increased productivity among workers, since less time is spent handling cash and more time is spent interacting with the customer, potentially upsizing their order."

Waiting in long lines could be a thing of the past. Retailers, such as McDonald's, Starbucks and Tim Hortons, are using mobile apps to shorten wait times. Customers can order ahead on the retailer's mobile app.

"When you arrive in the restaurant, there's a lineup specifically for you," said D'Souza. "Since you've already paid, you won't have to wait. You can simply pick up your order and leave."

Avoiding the pitfalls of a cashless society
While a cashless society has its upsides, it's not without its downsides. Some disadvantages of a cashless society and how to mitigate them include:

1. Increased risk of identity theft. Identity theft has become more prevalent with the move toward a cashless society. Criminals are doing their best to stay one step ahead of credit card security. For example, criminals are using radio frequency identification (RFID) to steal your contactless credit card information.

"You could walk by someone and unbeknownst to you, have your credit card information stolen," said Cane. This method might be unlikely, but it's still possible.

Other fraud methods include "shimmers" (which are devices placed over card readers that can take information from your card's chip), phishing, smishing, and, of course, old favorites such as pickpocketing and other offline scams.

Not to mention, companies often report data breaches, and criminals are targeting bigger companies all the time.

Regardless of how your information is stolen, it's useful to criminals.

"This information can then be used to commit fraudulent purchases in your name and potentially damage your credit score," Cane said. You might not be liable for fraud charges, but your credit score could take some time to repair.

2. Danger of overspending. Although a cashless society is more convenient, that convenience comes at a cost - perhaps literally.

It's more difficult than ever to control your spending when you don't see money physically leaving your wallet. Mastercard and Visa aren't making it any easier, with contactless payments, such as PayPass and PayWave, and the gamification of credit cards with reward programs.

However, just because you aren't handing over physical cash doesn't mean you can't keep on top of how much you spend.

"Many of us check our smartphone a few dozen times a day, so it shouldn't be a stretch to check your credit card balance once or twice a week," said D'Souza. "There are also phone apps such as Mint that make tracking your spending easier."

You may also be able to sign up for spending notifications or card limit notifications to be sent to your phone via text message. And if nothing else, go old school and keep a running tally of purchases using pen and paper.

3. Not all places accept all cards. In a cashless society, it's more important than ever to have a backup credit card.

Not only do you want a backup in case your primary credit card is compromised, you'll want one in case a retailer doesn't accept your credit card or there is a network outage.

That's right - from time to time, credit card networks go down with specific lenders.

"If you don't have a backup credit card or form of payment, such as debit or cash, you could have no choice but to leave a shopping cart full of groceries at the checkout," said Cane. "This hassle could have been avoided if you had simply planned ahead."

It may be a few years yet (if ever) before Canada sees the true end of cash. But in an increasingly plastic world, it's best to be prepared and know how to navigate a new payments scene.

See related: Are you being safe with your account info -- or paranoid?, Is there privacy in a cashless society?
Published October 6, 2017

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