Once upon a time, there was a thing called cash, made up of notes and coins…

Today, cash can sometimes seem like something from a fairytale. Even though just 20 years ago it was the dominant form of payment, for many of us nowadays it’s rare to see it used - and there are many people who have never made any payments with cash! 

It’s more and more common for people to pay using contactless: whether tapping their card, or using their phone. 

Let’s look at some of the benefits and potential problems with using contactless. 


The move away from cash

When’s the last time you bought something with cash?

How much cash have you got on you at the moment?

If you’d asked someone this at the start of the millennium, they might’ve seemed like silly questions. The person might say:

or might tell you to mind your own business instead of asking them about what’s in their pockets. 

But today, it’s much more likely someone will have to think hard about their last cash payment, and probably won’t be offended by the second question - because they’re not carrying any cash! 


The rise of contactless

Over the past few years, contactless has become the payment method of choice for lots of people.

Accelerated by the pandemic, many places now want you to pay by card - and many establishments won’t accept cash anymore!


Phone payments take over

While card contactless payments were the go-to for a while, phone contactless payments have now become the done thing. 

Whether you’re using Apple Pay or Google Pay, you probably pay for lots of things using your phone - and might even leave the house without any other form of payment, neither cash nor a physical card!


Benefits of contactless & phone payments


First, you had to go and get cash out of the bank to pay with. Beyond that, you had to take out your bank card, put it in the card machine and enter your PIN. Now, you just have to tap once and, ta-da, you’ve got what you came for. 

This makes your life a lot easier as you have to do less. 


You can carry less stuff

If you’ve got loads of notes and coins knocking around, this can be a bit of a burden to lug around. 

Being able to pay with your phone means no notes, no coins and often no purse or wallet at all! All you need is your phone.


You’re less likely to lose money

Even though you might lose your bank card, this is much less likely than dropping some notes or coins accidentally. And if you do lose your card, it’s fairly easy to cancel or block the card online - whereas physical money that’s gone, is gone, never to be seen again. 

It’s also less likely you’ll give someone too much money by mistake if using contactless.


Problems with contactless & card payments

Although there are some benefits to using contactless, here are things you’ll want to be wary of:


Detachment from the real value of money

When paying in cash, it’s much more tangible that you’re giving away something: you take the coins and notes out of your wallet, you give them away, your wallet gets a lot less heavy - you feel like you’ve actually lost something. 

Even though this isn’t the case when using your card and entering your PIN, the act still feels significant - which means you’re more likely to feel that the expense is important.

However, when we’re tapping to pay with our card or phone, it’s such a throwaway gesture - it carries no significance and makes the act feel insignificant, so you’re detached from what your payment actually represents.

But considering that in the UK you can pay up to £100 in one contactless payment, one tap could have serious consequences for your finances. 


Too easy to spend & too hard to set limits

Contactless leads us to spend a lot more than we would if we were to use a more tangible form of payment. 

When we go on a night out with cash, we need to withdraw money from an ATM beforehand to use as our spending money for the night. 

Then, if that money runs out, you won’t have any left - so you’d spend more carefully and wouldn’t be able to spend more than the money that you withdrew. 

With contactless, because it’s so easy to tap, people often lose control, spending more than they’d wanted or planned to - especially a problem if they’ve had a bit too much to drink. 

Even if you’ve set a spending limit in your head, it’s very easy to forgo this when you’ve got contactless - what’s one more tap, after all?

This problem becomes even worse if you’re using credit cards, as you’re then spending money that isn’t yours, which can very quickly get out of hand and get you in financial trouble.

Much harder to budget

Contactless can make it more difficult to stay on top of your finances. 

For example, in London when you use contactless to pay for the bus or tube, the money doesn’t come out of your account straight away. Instead, it usually comes out the next day - but especially over weekends, you might not be charged until a few days later. 

This can lead to nasty surprises, as the amount can add up a lot over the weekend and leave you in a difficult situation, because you thought you had more money than you actually did. 

Compare this to using an Oyster card in London that you have to top up beforehand. Doing things this way, you know exactly how much you have on your card, and you have to go and top it up if you haven’t got enough. This makes it much easier to track how much you’re spending.

If you lose your card, someone could end up spending a lot

We mentioned earlier that an advantage of contactless is that you won’t drop money anywhere, and if you do lose your card you can block it fairly easily. 

However, before you block it, someone could still spend a lot of money on your card using contactless. 

Some cards and apps have contactless limits on them, which means you can only spend up to a certain amount using contactless before you have to then insert your card and use your PIN. 

This could still be a significant amount that someone could spend without needing a PIN. And worse, if you haven’t set these limits, someone could go on an unlimited spending spree using your card - which they wouldn’t be able to do with cash, or if they had your non-contactless card that requires a PIN all the time.


Be wary of contactless

Contactless provides lots of convenience and can make your life a lot easier.

But as we’ve said before, convenience often comes at a cost - so weigh up whether the benefits that contactless provides outweigh the potential issues and the damage it could do to your financial wellbeing. 

If you are going to use contactless payments, here are some tips:

  • Make sure to set contactless limits - this will mean you have to insert your pin more often, making you more conscious of your spending, and will also limit any damage if you do lose your card or phone

  • Always check you’re being charged the right amount - don’t tap without checking the amount on the screen! Or you could be overcharged

  • Check your account after each payment - to make sure you’re okay with how much you’ve spent and keep yourself on track with your money goals

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