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Pros & Cons of Living Cash-Only

February 19, 2021 · 5 minute read

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Pros & Cons of Living Cash-Only

As the world becomes increasingly cashless, you may wonder if there is any point to carrying cash around at all.

The answer depends on your lifestyle and spending habits. Carrying–and paying in–cash, however, can still make sense in many circumstances.

Indeed, some financial experts believe that switching to a cash-only system (and moving away from digital payments) can actually be a wise money move for many consumers.

For one reason, going all-in on cash can help you stick to your budget and put an end to overspending.

The cash-only lifestyle can also help you avoid the expense of overdraft, banking, and interest fees that often come with using check, debit and credit card payments.

Of course, there are also some potential downsides to going exclusively cash.

To figure out whether cash living might make sense for you, read on.

Below are some of the key advantages and disadvantages to living on a cash basis, plus tips for how to make the switch, should you decide to give cash living a go.

Pros of Cash-Only Living

Spending money the old-fashioned way can offer some significant perks. Here are some benefits that come with using cash for all your transactions.

Using Cash Only Can Help You Budget–and Save

When spending is invisible, it can be all too easy for people to forget that real money is actually going out the door–and all too easy to get in over their heads.

Using a cash-only payment system, even if it’s just for a month or two, can be a great way to see exactly how much you’re spending each day and week, and help you learn how to live within your monthly budget.

That’s because with cash accounting you only take out the amount you’ve allotted to spend for a certain period of time. When you’re out of bills, you’re done.

And if you use the envelope system (more on that below), you’ll be able to set aside specific amounts for all of your spending categories, such as rent, food, and entertainment.

You can then only use the cash you’ve withdrawn for those expenses, which can keep you from spending outside of those pre-set limits.

Cash-Only Living Can Help You Maintain Privacy and Security

Every debit or credit card transaction leaves a digital paper trail, and enables companies to know exactly what you buy, when you buy, and precisely how much you spend.

A more troubling concern can be the potential for data leaks of your personal and credit card information, which can result in identity theft.

If someone steals your identity, they could potentially empty your accounts and obtain new credit cards and credit lines in your name.

Using a cash-only payment system reduces the odds of a breach.

Cash-Only Living Can Help You Save on Interest and Fees

Credit cards often come with annual, as well as late payment fees.

And some stores and service providers, especially small and local businesses, may charge an extra fee to take a credit card payment, since they have to pay for the transaction.

In addition, if you don’t pay your credit card balance in full, you’re likely to end up paying exponentially more thanks to high interest rates–which often exceed 16 percent.

Cons of Using Only Cash

Using cash-only can also come with risks and disadvantages. Here are some of the drawbacks.

Cash Living Can Come With Costs

Some ATMs charge fees for withdrawing cash, which can be troublesome if you find yourself suddenly out of money and need to use an ATM outside of your own bank.

By using credit cards instead of depending on ATMs, you may be able to avoid those costs.

Cash Living Can Have Security Concerns of Its Own

Keeping cash on your person or in your home comes with vulnerability.

You could be a victim of theft, or the cash stashed in your home could be destroyed in a disaster, such as a flood or fire.

With no record behind it, the money that is stolen or ruined is as good as gone.

A lost or stolen credit card, on the other hand, can be reported and you can often successfully dispute any fraudulent charges.

You Fail to Build Up a Credit History

There’s something ironic about the way lenders look at credit history: If you haven’t borrowed much in the past, lenders may be reluctant to lend to you now.

Opening a credit card account is one way you can build up a credit history (other forms of credit, such as student or car loans, count as well).

A strong credit score is based in part on the average age of your account (the older the better), as well as a history of paying your bills on time, and how much debt you have in relation to the amount of credit available to you.

Your credit score is an important factor if you’d like to take out a loan in the future, such as an auto loan or home mortgage.

If you pay for everything exclusively in cash and never use credit (which is often hard to pull off), you may have trouble showing that you have the credit history to qualify.

Tips for Living a Cash-Only or a Cash-Mostly Life

If you decide to switch to an all, or largely, cash life, here are some strategies to help make the shift as seamless as possible.

Choosing Which Categories to Switch to Cash

Certain payments and bills, such as a mortgage or your student loan, need to be paid digitally or by check.

But you may want to switch groceries, entertainment, clothing and eating out to cash-only to keep better tabs on the outflow.

Cutting Back on Debit/Credit Card and Check Use

For your cash-only categories, it’s a good idea to stop using your debit card, credit card, and even your checkbook to pay for anything in those categories.

You may even want to consider leaving them at home.

Setting up a System for Tracking Cash Flow

To keep cash for different categories separate, you might consider using the “envelope system.”

With this system, you set a certain amount of cash to spend in each budget category. These pools of money are kept separate in different envelopes.

To keep track of the flow, you can put receipts in the same envelopes as you spend.

The goal is to make the cash last all month. Once the envelope is empty, you’ll either be done for the month or will need to take cash out of a different envelope, potentially short-changing another category.

Establishing a Time to Take Out Cash

Whether it’s a certain day each week or month, you’ll want to make sure that you go to the ATM on a regular basis to get the full amount of cash that you’ll need until the next ATM trip.

Planning Shopping Trips in Advance

It’s generally better not to carry a load of cash around, so you may want to know ahead of time what errands you’ll be running, and how much you’ll need for each outing.

(As a bonus, this can also curb unplanned–a.k.a. impulse–purchases.)

The Takeaway

If you’re looking to fix or improve your everyday spending habits, nothing works quite like a cash-only lifestyle.

By forcing you to stick to pre-set spending limits (and actually see where your money is going), this approach may be able to help you keep your monthly spending within your budget.

While cash-only living can take away from efforts to build credit and can have some security issues, this method of spending can also help you save on credit card fees and interest.

If you’d like to pay in cash more often, but still want to earn a competitive return on your money, SoFi Money® might be a good option for you.

SoFi Money is a cash management account that allows you to earn, spend and save–all in one account.

Plus, members can enjoy anytime access to their money at 55,000+ fee-free ATMs worldwide.

Check out all the perks a SoFi Money cash management account has to offer today!



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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