Sparked by the pandemic, cashless payments have become the new norm to minimize contact. Caleb Silver, editor-in-chief of Investopedia.com, joined Cheddar News to explain some of pros and cons of carrying cash in a digital world.

The Pros & Cons of Holding Cash in a Digital World

Welcome back to closing bell on cheddar news everyone. Well, once the only form of payment, cold hard cash is in a tough spot in an increasingly online world. And while the cashless trend started gaining steam in the years leading up to the pandemic, the crisis, no doubt accelerating the transition to contact list transactions. Well, despite it's dwindling use. Now, cash is still important for key demographics, particularly lower income americans and using it may actually help you spend less than you would with a credit card. I've seen that firsthand these days. So joining me now is Caleb silver editor in chief and investopedia Caleb always good to see you. What are the trends that we're seeing here? The trends are pretty obvious, but about four in 10 americans say they use no cash at all. That's according to a Pew Center recent survey, which shouldn't surprise us. Uh, the older americans are favor more cash. I'd like to have a little cash on hand. Younger americans don't, but folks earning less than $30,000 they rely on cash a lot. Don't forget there's at least 14% of americans who are unbanked or under represented in the financial sector. So a lot of folks still depend and there's plenty of good reasons, but the use of cash has been dwindling year after year after year and it was accelerated during the pandemic. So, you know, one thing I've noticed Caleb even just these past few months or so is for instance at my nail salon whenever I treat myself to a manicure, if I pay in cash, I will get a cheaper price these days than if I pay with a credit card. And I think that's just because they're basically waving that additional credit card fee. Is that a trend that you've seen? Absolutely. And that credit card fee can be as high as 4% for some cards and some businesses. So businesses are always looking for a way especially now with inflation, but people potentially pulling back to make it easier on their customers and make it easier on themselves so they don't have to pay the transaction fee on the back end. You'll find that, you know in nail salons, you'll find that at my barbershop we go through the same conversation over there even at my mechanic, sometimes better price for cash. So you still have a lot of needs for it. And there's plenty of benefits to have to having some at least on you if you can. And part of that is just controlling your impulse purchases when you have that credit card, it's easy to make those purchases without thinking of because you're not seeing that bill until the end of the month and you're just kind of putting that out of your mind. Also avoiding those transaction fees as we just talked about. Plus don't forget around the world the U. S. Dollar, especially the $100 bill, Still a very very powerful note, very powerful piece of legal tender outside the U. S. So that's useful. And also tipping, you want to tip your manicurist, you wanna tip uh you know a bartender, you want to tip the hotel bellhops. It's very useful in that respect. So it's good to have a little cash on you. Okay so we talked about the pros. I agree gotta tip those manicure as well. They do a good job and I'm sure your barber as well Caleb your hair always looks very nice on camera. Let's um let's talk about the cons though. I think some people who don't use cash right? And they have their own reasons for instance for not wanting to use it. What are those? Well a lot of folks don't trust credit, the credit card industry. A lot of folks um you know don't necessarily, in terms of folks are not wanting to use cash, they're not able to build their credit history if they're not using a credit card credit card. Um So you want to be able to build that history and get those rewards points. A lot of obviously credit card companies even debit card companies are offering rewards points, cash back on, shopping, airline, hotel points. What have you, even the ability to get cash to make purchases through some of the inside apps there. And also you don't have access to e commerce or e banking if you're purely cash using individual. But that said there's a lot of folks that don't even have access to the digital world and they don't have, they're not banked, They don't have credit cards, they don't have credit histories. Some may not even be paying taxes and cash is the only medium that they can use. And that's why you still see a lot of folks using it. Let me ask you about Cryptocurrency how that might impact the cash world as well because that would obviously be exclusively digital. Are you seeing the trends that we see in Cryptocurrency Caleb even though the price of these assets like Bitcoin is down significantly have any impact on the future of cash? Well very clearly and we're already seeing it happen in some countries a little less successful in some places like El Salvador where they try to make it legal tender and give everybody Bitcoin. But when the price of Bitcoin falls, that value sort of wipes away the property. The value proposition that said there are more and more vendors, there are more and more companies that are offering crypto for using their their services. Mastercard was out with news today that it's offering access to Bitcoin. Mastercard holders. We know Fidelity is going to be offering Bitcoin to 401k users by the end of the year or by the end of next year. So we know that that's happening. And you know one of the most popular questions we get on investopedia Christie is what is money and I don't think that is necessarily a baseline question of what is this thing I have in my pocket. But what is it actually, is it legal tender? Is the ability to transact between people? Is it Cryptocurrency in the future of money? So it's become a very metaphysical question and the use of cash has also become sort of metaphysical in the way we think about commerce and transacting with one another and within businesses. Here's another question for you Caleb, I don't know if there's sort of like a universal tip here in terms of what is the appropriate amount of cash to have on hand? What is a safe amount of cash to have on hand? Do you ever interact with your viewers at all and um readers about that? Yeah, we get that question all the time and there's a lot of different answers on that cash on hand, not necessarily cash in your pocket walking around, but cash on hand in the house, maybe $1000 and maybe in small denomination bills. That's usually what we recommend for those extra things that tipping of the you know the guy who who takes care of the tree limb that falls on your property or the newspaper delivery guy or for some reasons like that, the cleaner dropping things off. So cash on hand is useful around the home, you never know when you're gonna have that emergency, You never know when you know your your banking if you do online bank that goes offline. So it's good to have something we say about 1000 bucks in terms of walking around cash. It's never a bad idea if you can have that $20 bill or even 100 bucks stashed away in the deep part of your wallet just in case of emergency. Out driving, you need to get cash someplace or you know, it's late at night, you need that cash for one reason or the other, it's useful to have some on you. I just wouldn't have that much because on the one hand, it helps you, on the impulse buying. On the other hand, cash is easy to go right through your hands if you're, if you're not careful when you're spending it. That's very true. Got to be careful, Caleb, Sylmar, thank you as always Caleb the editor in chief of investor pdf