Skip Commercial Banks! How Cash Only Living Can Work

by Guest Blogger on 2012-09-2045

According to a recent U.S. government study, seventeen million Americans manage their money without the use of a bank account. This means that they have no savings or checking account. Many look down upon this way of life, but it is difficult for me to say it is a bad thing given the fact that my grandparents live on a cash only basis. It seems to be working for them. So, what are the benefits of living without a bank account and managing your cold hard cash alone? Well, the main advantage is that you avoid unruly bank fees and the time it takes to manage and balance your checkbook each month. This makes living on a cash only basis very tempting for many consumers.

5 Great Tips For Cash Only Living

So, how does a person live without dealing with a commercial bank? Can you really live without the conveniences of savings accounts and ignore the beckon of free checking accounts? Well, let’s take a look here at some simple steps that show how you can live with a “cash only” system. Find out if this is something you can do!

cash only livingImage from PoeticHome.com

1. Carry cash for groceries and gas.
Carrying cash for groceries and gas not only allows you to stick to your budget, but it also protects you from fraud against your bank account. Thieves are getting smarter and are now using special equipment to gather all of your debit and credit card information from the places you may swipe a credit or debit card. Using cash keeps your money safe.

2. Pay bills with money orders.
If you don’t have a checkbook, then how do you pay the plumber? Well, be careful: sending cash through the mail is not safe nor recommended. Therefore, a great way to pay your bills through the mail is to use money orders. You can get a money order at a grocery store, gas station, or the post office. You pay for the face value of the money order and a small additional fee for the service. Money orders are great for replacing the use of checks. In addition, you may actually save money because with a checking account you typically have to spend $20 or more on checks for your account. Money order fees may be much less than this for someone who does not have many bills to pay each month (ymmv). But costs can add up and things may get impractical if you’ve got lots of bills to cover (you may have to be more organized to pull this off); still, going cash only may be the impetus to changing how you live. It may just encourage you to live on less (therefore generating fewer bills to pay!).

3. Use an envelope budgeting system.
Use envelopes to divide your funds for different categories of your budget. You can have an envelope for savings, food, gas, emergencies, utilities, and other bills. Divide your cash across envelopes so each category of your budget is fully funded. When money is removed, simply note your transactions on the outside of the envelope and write the new balance. This way, you know how much money you have available for each category at all times. Thus, it helps you to stick to your budget! More on the envelope budgeting system here.

Tip: If you’d rather use a money management software program that incorporates envelope budgeting in its functionality, then check out the application called “You Need A Budget”. You can read more about this product’s features in our YNAB (You Need A Budget) review. We also discuss such tools in this post.

4. Use a prepaid credit card for airline tickets and car rentals.
If you don’t have a credit card or a checking account with a debit card, you can always purchase a prepaid debit card online or from a drugstore or gas station for the purposes of paying for items that require a credit card such as airline tickets and rental cars.

Tip: Take a look at our Best Prepaid Debit Cards section for some great card choices. Note that prepaid cards are NOT credit cards nor even bank debit cards, but are products that can be used as cash alternatives when you predeposit an amount towards the card. You don’t need a bank account to make a deposit (just visit a qualified retailer).

5. Ask for receipts.
You may need to keep track of expenditures for tax purposes. When using cash, always ask for a receipt. Place all the receipts required for tax reporting in an envelope, file or organizer which you can turn to at the end of the year when you’re ready to work on your taxes. This will make it easier for you and your tax preparer to ensure that nothing is overlooked, plus these will come to your rescue in case of an audit.

Managing your money without a checking or a savings account can be done. I have been using “cash only” for food and gas for several months now. It works wonderfully for me because I have better control of my budget. In the past, when I used a debit card, I would spend much more than I would budget for food. These days, when I run out of cash, I stop spending. It also makes it very easy for me to quickly see how much I have left in my budget. I just glance at my envelope and see the balance on the outside. Living on a cash only basis not only helps me save money, but also allows me to control my money. This should put me in a better position to be financially free. So is this something you’d consider doing? Brave enough to fire your banker?

 
Contributing Writer: Selena

Created February 25, 2010. Updated September 20, 2012. Copyright © 2012 The Digerati Life. All Rights Reserved.

{ 45 comments… read them below or add one }

Mark Salisbury February 25, 2010 at 8:52 pm

I agree with you. This is the old fashioned way of managing money but works. This is probably unattractive to many people now but it works.

Mr Credit Card February 25, 2010 at 11:10 pm

also

make sure you have a really good safe

pray that your house never catches fire

hope you never get robbed (guess you’re ok with the safe)

If you really have a networth of millions, then you’d better find a safe place to keep your money.

Credit Card Chaser February 25, 2010 at 11:14 pm

I always carry cash on me because I hate to be without cash but I rarely every actually use cash as it is much more convenient and easy for me to use my credit card and debit card and just keep the cash on hand as a safety net.

Silicon Valley Blogger February 25, 2010 at 11:30 pm

Mr. CC makes excellent points. Maybe if you bury your bucks in the backyard it will be safer there! Or get a truly fire-proof safe.

The Saved Quarter February 25, 2010 at 11:36 pm

I have a checking account with my local credit union, but manage 95% of my spending with cash. I use the envelope method and it’s been working really well for me. It keeps me accountable in a way that charging and check writing don’t. I can’t “float” cash. I can’t overdraw it. When it’s gone, it’s gone. I don’t spend $1 bills or change, but put them in a change jar; that’s been saving me quite a bit as well.

I have a single secured credit card through my credit union and checkbook; neither live in my wallet. I pull out the checkbook once a month to write my rent check, and use the credit card once a month to charge my car payment at the teller window at my credit union, which also holds my car loan. I pay the credit card bill in full in cash at the same time.

That way, I get the record on my credit report for paying both the credit card and car payment on time, but I’m still paying cash for it. It’s a little complicated but gives me the advantage of improving my non-existent credit score should I ever need it.

reviewmylife February 26, 2010 at 12:30 am

Using cash on a daily basis is fine. But…

You really should have a bank account to build up savings. I would never recommend keeping large amounts of cash in your home. It could get burnt in a fire, damaged in a flood, stolen, etc.

You need a good amount of savings in a bank account to cover you for unexpected events such as losing your job.

And if you keep money as cash it will lose its value more quickly as you won’t be getting the interest it would get in a bank.

basicmoneytips February 26, 2010 at 5:08 am

This article gives an interesting take on non-traditional (anymore) finances. Its certainly true we have moved from a cash based society to an electronic society.

There are probably more “unbanked” than just 17 million. Go outside the USA and that number jumps significantly. That is why companies like Moneygram (who wire transfer cash) do so well. Also, that is why prepaid cards are doing well.

My big concern would be savings, where do you keep it that is truly safe?

Interesting points I suppose, but just not for me.

Chris February 26, 2010 at 7:01 am

Recently, in my country, hundreds of bank accounts have been robbed using a phony ATM card. Your article has given me so many more reasons to draw all of my money from my bank account to put it in some other safe place.

Kosmo @ The Casual Observer February 26, 2010 at 7:19 am

“In addition, you may actually save money because with a checking account you typically have to spend $20 or more on checks for your account.”

I’m not sure what this means, exactly. Is this referring to the cost of buying the checks from Current or a similar company? Sure, it may cost $20, but I probably get 500 checks for that price (I’d have to double check the exact numbers) – about 4 cents each. I’m thinking money orders around here are at least 50 cents each, so even if you only paid a handful a bills this way each money, over the course of a year, it would probably be less expensive that buying checks.

Or was this referring to bank fees of some sort?

Silicon Valley Blogger February 26, 2010 at 8:40 am

@Kosmo,
I’m guessing you’ll have to compare and weigh the difference between the cost of checks from where you source them vs money order fees in your locality. From my experience, given the costs and convenience, the checks will always win out. But it may be a different story somewhere else — especially if you don’t have many bills to pay and if you have some special deal with the establishment you’re preparing money orders from.

It’s a good question you pose, and one I also had myself. But with dealing with personal finance, I can only say that many times, it seems that different people have different experiences and outcomes, many times, surprisingly so. I will ask Selena (our contributing writer) if she can qualify that statement.

One more thing — personally, I think that the cash only approach may work for SOME areas of your finances. For instance, I wouldn’t go all out with cash only for everything. Maybe a certain area of your finances may benefit, such as grocery shopping or purchasing things at stores. While some people can go all out with 100% cash only, I doubt I can be one of them. Then again, it’s a bit of a radical move but for some people, it may work pretty well.

Lisa Gardner February 26, 2010 at 9:19 am

I’m on my way to a partial cash lifestyle to manage my finances – maybe I’ll try the envelope system. Even if I do it for a month, I’m sure to have a better handle on where money is going…

If your employer offers direct deposit and you don’t have a bank account, US employees can get a prepaid debit card – not only to make online purchases (this is one area that the cash only lifestyle doesn’t support) – but to get your pay direct deposited to your prepaid card. If you are like the 30+million un- and underbanked americans without a bank account, you are probably paying to cash your paycheck. Banks charge anywhere between $3-$8 per check to cash and check cashing stores charge up to 12%! Check out this article on The Beehive regarding check cashing stores: http://bit.ly/3aNd4X

If you are interested in going for a partial cash lifestyle, consider prepaid debit cards for payroll – this will keep your money safe (protected by Visa) and you’ll be able to access your cash when you want as well as pay bills online to eliminate both money orders AND bank checks. There are many other benefits to prepaid debit cards for payroll. Ask your payroll department to find out how they can get all employees who don’t have bank accounts on direct deposit, saving every employee money each and every pay cycle.

Chris Cobb February 26, 2010 at 12:43 pm

Wow! That’s a lot of trouble to avoid having a bank account. Online bill paying, direct deposit and ATM/Debit cards make financial life so much easier, but they all start with your bank account. If you need some discipline against over spending, cut up the credit cards.

Bucksome Boomer February 27, 2010 at 7:58 am

Many employers require direct deposit so the employee has to have an account at some financial institution.

I tried using cash only for gas and found it more convenient to use my debit card. Otherwise i had to go into the station versus handling the transaction at the pump. There was no way I was going to overspend on gasoline so it works.

I use cash for categories where it’s easy to overspend (blow money, entertainment and dining out).

Goran Web Design March 1, 2010 at 10:32 am

Cash is King, and when it is finished, it is finished. You can not go into the red with cash….

Credit girl March 1, 2010 at 3:23 pm

I figured if you live within your means, cash only can work. People who don’t see a need for having their money in a bank can simply just pay everything off as they go without the stresses of credit card debt or bank limits.

Dave Richards March 2, 2010 at 7:42 am

Hi Selena, I am definitely one of the members of the “cash only” society. Of course, the one fear that you have in carrying cash is the worst chance to be mugged or robbed. With extra care and being accustomed to having cash in your pocket, you could avoid this rare situation. Operating on cash basis indeed puts you on a strict budget implementation. Also it eliminates the jitters of electronic cash. A wrong swipe, offline situations may cause your “liquidity” to “evaporate”.

To be a cash carrier means that you are a very organized person and using envelopes to allocate your expenses has been maybe our grandma’s method of spending but very effective. I must admit that I misplace some paper bills, especially when you are in a hurry of paying and receiving your change. I do believe that it is just a matter of discipline but for some managing through cash seems to be a tall order.

Elvis March 4, 2010 at 1:25 pm

So how do you save or invest the left over money. Once you have anything over 50 grand you have to have it in a safe place or you risk losing it. Albeit the storage problems you will have with all those dollar bills.

~Carla~ March 4, 2010 at 2:31 pm

I’ve fired my banker.. so to speak. ;) I’m budgeting using jars (same concept as envelopes) and put my allotted cash into each jar every Thursday (hubby’s payday). For bills/savings however, the rest sits in the bank and is automatically paid/transferred when it’s supposed to be. I’ve been doing this for 5 weeks now and it’s working awesome for us! I used to overspend a LOT too, now, if I see I have $20 left for food, I know i’d better save it for what we NEED, not just a splurge item. Since I started with a jar budget i’ve saved up the “leftover” money to the tune of $253! :) Great post! I’m going to have to add you to my blogroll.. found you through Frugal-Dad!

theCase March 5, 2010 at 9:42 am

so… You DON’T have direct deposit (title is “Skip Commercial Banks…”) and get a paper payroll check???

Where do you cash this? I don’t know of many places that will cash such large checks unless you have an account….

Ron March 7, 2010 at 1:59 am

Hey, we survived hundreds of years without plastic so cash only living can work! It’s just a matter of doing it old school! But nowadays, we may need to use plastics because some merchants prefer to do it that way. That’s where your number 4 tip comes in. Also, keeping track of the receipts is just the right way to do it even if you’re living in a credit card world. Some people find number 1 hard though because they don’t want to carry a lot of cash around. You can also get mugged if you carry a lot of cash in your pocket. So just stay vigilant. You can also use coupons as well to complement the cash that you have. You can clip it from the Sunday paper or just go look for online coupons.

Donna Freedman March 16, 2010 at 5:01 pm

Just FYI: The payday loan/check cashing place near me offers free money orders, no strings attached, no need to buy anything. Maybe others do, too?

But I agree that for many reasons money is safer in a bank because it’s FDIC-insured. I don’t pay any kind of fees for checking or savings, but not everyone has a choice of banks; if you live in a rural area, you use whatever’s available.

Here’s a question about “fireproof” safes. I found this info on a security company’s site: “The fire protection rating is based on how long the safe can withstand heat and at what temperature. The average house fire burns at a temperature of 1200° F and paper chars at 450° F. A fire safe maintains the interior temperature of the safe below 350° F for either one- half hour, one hour, or two hours.”

So suppose you bought the half-hour safe and the firefighters can’t put the fire out for an hour. (Think “rural area with volunteer fire company.”) Will your paper money be a nice little pile of ashes when you dig the safe out from under a pile of collapsed framing timbers?

Reuben Gathright ~ Concerned Parent April 30, 2010 at 8:34 am

I really enjoyed reading this. What do you suggest for earning interest on investments?

Eric June 21, 2010 at 8:29 pm

I’ve been living on a cash-only basis for about 10 years, and to be honest, I’m thinking about changing my ways.

I’m a 35 year old professional. I drive a 10 year old car and live in a small apartment. I can’t buy another car requiring financing, as I no longer have a credit rating at all. I certainly can’t buy a house. I am watching my friends reap the material rewards of using credit to live their dreams, while I can’t even get a girlfriend (they see my car and where I am living, and run the other way). Unlike all of my friends, I have no debt whatsoever, but this is little consolation.

My cash-only life has destroyed my dreams, and set me back to where I was financially 15 years ago. I have nothing whatsoever to show for having worked so many years.

Denise June 29, 2010 at 11:33 am

I am finally going to cash only basis. As far as a comment above about a “safe” place to keep your cash, I feel a bank is less safe than under my mattress. I look at the people that have lost 1,000’s of $ in bank crashes or whatever. No, I’m not the brightest bulb on the string but at least I will be responsible for my own failure if I don’t take care of my money. The extra work of paying bills the old-fashioned way is going to be refreshing.

Thrifty July 15, 2010 at 7:19 pm

I am partial cash. I am closing my savings account because it yields little to no interest. I have a retirement fund with my employment and a checking account that I only deposit money into when I have to write a check to pay a bill. Also I keep a debit card for when I want to make online purchases. Otherwise I use the envelope system for the rest of my money. When I find a savings account with a high interest rate I will begin putting a portion of my money in savings again. But until then, cash is king!

Anthony August 15, 2010 at 7:48 am

When I was younger (18) the debit card was just gaining popularity. I can remember the manager of a Wendy’s and my mother laughing about how someone would use a debit or credit card to pay for an 80 cent coffee.

I, on the other hand, thought it was great, at first it seemed to help me manage money better; at least I told myself so. Now fast forward many years and it seems like there really was a reason the past generations had a better grip on finances.

I’ve gone back to cash mostly and saved big. It’s amazing how much less is spent each month. I do still use debit for some things and deposit part of my money accordingly..

For instance, bills are on auto withdraw. Also I use debit for fuel to avoid going inside where I’ll be tempted to buy junk I don’t need.

Otherwise I’m strictly cash now — at the end of the month my excess savings is thrown into a savings account that I cannot easily access. (thus avoiding the silly fire scenario)

I don’t think either extreme is that realistic but a mix of both works for me.

j September 1, 2010 at 3:42 am

wow Eric you sound like a real loser. 10 years of cash only and still no gf? The only way to get a gf is to go into debt and be broke like all your friends? I drive a cheap car and live in a cheap apt (to save $$) and get laid all the time. What kind of shallow small minded chicks are you after? Why do you not have a pile of cash by now? I’m younger than you but you need to grow up.

Elvis- $50 grand? Where does that number come from? I have more than that it’s not in an unsafe bank that reports my every transaction to the fascist fedgov. Keep 50k in a bank for a ridiculously low yield and have it exposed to taxes, asset searches and lawsuits? Not to mention all the bank failures. And banks are safe? Hello? Credit cards are safe? Stop living in the 1990’s. You’re more likely to be robbed by your bank, credit card company or credit union than by someone on the street. When I’m out shopping I often have about 5 grand on me (I like nice stuff), I always have my 2 friends mr. Smith and Mr. Wesson with me.

Chris Cobb – living without banks isn’t any trouble really, if you know how to think for yourself. Sure beats having to constantly watch out for banks’ gotcha fees they keep coming up with or forgetting to write down that purchase of Mary Kay or gas for your minivan. Are you a bank teller? Banks are *not* your friends. You women need to get over your emotional attachment to your debit and credit cards. You stay with them like an abusive husband. Keeping track of cash is easy. You need the ability to count and half a brain. You may use a price of scratch paper if necessary.

Review my life- you can build savings without banks. I’ve done it. Don’t be one of those people that worships your credit score. They are just another club to keep consumers in line. And as for direct deposit, it’s a great way to make your money readily available- to banks. You people need to start thinking for yourselves and push back. It’s not your employer’s business nor the banks how I manage my money. If they require direct deposit I can always go work somewhere else. First thing I do when I’m new to an area is research my options. Many smaller grocery stores cash paychecks for free. I’ve signed payroll checks over to my landlord and paid several months rent at a time. The check cashing places often have free money orders but are expensive to cash checks. Or the best option: just take your paycheck to the bank it’s drawn on. You’d have to go to the bank anyway if you had direct deposit, by getting and spending cash your privacy is maintained, and studies have overwhelmingly proven that people spend less when paying cash. Many bills can be paid for with cash in person, getting an instant receipt as proof of payment, again maintaining privacy. You just need to be insistent and push back. Renting a car or other business that wants a card as collateral? If they won’t take my cash deposit, I leave and go down the street to the guy who will, and will charge me less too because businesses are charged for taking cards. Many gas stations in my area also give substantial discounts for cash payment too. You sheeple need to learn to think for yourselves and push back!

Anthony September 18, 2010 at 8:36 am

@ J
I agree with everything you said, as I have been a cash only advocate for years. Also, what people don’t realize is that by going cash only you effectively render the identity thieves powerless. If you don’t use banks, credit or debit cards, then identity theft becomes extremely difficult. So cash only isn’t just a good idea from a money management standpoint, but also from an identity theft standpoint. As for the lame excuse that carrying cash somehow exposes you to greater chance of being mugged, my question would be why would it be higher? If you pull out your big wad in public, or wear a sign saying “I’m carrying a lot of cash” then you might have a greater chance of being mugged. The truth is, you have a greater chance of having your identity stolen than of being mugged.

As for the safety of keeping your money at home instead of a bank, how many of you keep your expensive TV, stereo, etc. at home instead of locked in a fire safe?

Aren’t you concerned about these expensive things being stolen instead of your measly few hundred dollars that you have stuffed in your mattress.

As for where to put your savings, try buying silver coins or gold. Silver is at a 30 year high right now and is a great way to offset loss of purchasing power from your savings that are sitting in your bank account.

@ J
I have a question though, How do you purchase things online?

J September 20, 2010 at 6:51 pm

Anthony, buying online is easy. I don’t use banks for *anything* except the butt of jokes. Most times I insist they allow me to order online but send in my money order. Other times, I go to rite aid and buy with cash one of those prepaid visa, mastercard, or amex gift cards. I mean gift cards *not* the money cards with all the fees that also require a ssn. You do have to pay a $3 or $4 fee to activate, but you can get them for any amount from $20 to $500. Look for the ones that give you one year to use up the funds before dormancy fees kick in. They aren’t hard to find. You don’t need id or have to be a certain age. You can use them anywhere they take credit and debit cards of the same brand. Also many stores sell retail gift cards for merchants such as amazon, for no fee. They also have them for the airlines, that’s how I do travel. I get my concert tix this way. Then go to that online merchant such as itunes or whoever and shop. I always order using an alias for extra security. For larger purchases find out if they take western union, or you can send multiple money orders. You will find the larger the purchase the more flexible they will become. Do not be afraid to push back.

A little story, last month I was at a mall department store courtesy desk where they do payment services for utilities etc, when a very well dressed young man pulled several thou in cash out and explained he was paying off a credit card. I overheard him explain that he and his gf had been the victims of an identity fraud, they hadn’t been able to open any accounts for almost one year, and they discovered how peaceful paying cash can be. He went on to say how the banks handled the whole experience had been so enlightening, once they paid off the last of their accounts they were done using banks forever.

Anthony October 3, 2010 at 8:39 pm

J, Thanks for the great tips on purchasing online without a bank account.
I was wondering if you have netflix and if one of the visa or mastercard gift cards work for that too. I am going back to cash only without the banks and would appreciate any help you could offer.

Could we correspond by email or snail mail?
Let me know.
Anthony

J October 18, 2010 at 3:49 am

Anthony, it would be great to correspond. How can I get in touch? You can email me at jaisonsimms@rocketmail.com.

Silicon Valley Blogger October 18, 2010 at 8:12 am

@J and @Anthony,
If you guys are fine with it, I’ll give you each others’ email addresses. That can work out! :) Since I don’t publish email addresses on my blog, I can instead help with sending you the contact info you need in private.

Update: I’ve sent Anthony your email address J. Hope he responds!

Thanks!
SVB

Anti-banker March 12, 2011 at 9:32 am

I have a couple pre-paid cards. This works as a hybrid system – you put your cash into an account that allows you to spend your cash electronically. You can also use it to buy food gas, etc. Pre-paid can also sub as a savings account. The great thing is you cannot spend more than you deposit, have your paychecks deposited, even access and manage your account online. You can think of Pre-Paid like your own personal bank. It is a wonderful system!

Cindy March 31, 2011 at 5:55 am

I too had trouble with identity theft and still am. I pay everything with cash when I can I don’t trust banks but for large amounts of money you need one. It feels like my life will never be right. When that happens to a person and you don’t know until months down the road the damage to ones life is tremendous.It becomes so hard to do anything.I learned it only takes one person a bank teller a person at a store to use your info. once that happens it can be very bad and everything changes.I never give my info out unless I have to. I shred things now etc.. Cash in my opinion is better.

D. May 18, 2011 at 12:44 pm

I have a question – I’d love to be without a checking account, but I am self-employed and my clients often pay me with checks. Do I need a checking account in order to cash their checks?? Also, can you make online purchases with a prepaid debit card? I order supplies for my business online, plus a few other things.

Thanks for any help you can offer. (Sorry these may have been asked before, but I didn’t have time to read through all the questions).

Mark January 17, 2012 at 2:54 pm

Living without a bank account is easy and simple for me. I pay bills either in person or with postal money orders. I purchase immediate needs and dinners out with cash. For online purchases I use Amazon gift cards and retailer gift cards. Sometimes I even request a hard copy of a catalog sent to my mailing address and use a money order to order merchandise.
My accounting is simple. I just check my pocket or my envelopes to see how much money I have left.

I am not sure why prepaid debit cards are an alternative since they are still connected to a bank where your prepaid funds are deposited. You still pay a monthly fee and a reload fee. Plus you need to remember a PIN number to use it.

The advantages to using cash are:
Its easy to tell how much you can spend.
no complicated spending records.
No overdraft fees or “surprises” at the end of the month.
No impact on your credit record.
No billing mistakes.
No interest charges.
No pin number to remember.
No ID required to use it.
No chance of identity theft.
Just some food for thought. People lived just fine for thousands of years without bank accounts. Anyone can.

sara@WritersNeededmake$500Daily February 2, 2012 at 11:57 am

I don’t feel comfortable carry credit cards or cash! LOL they just make me nervous either way, but these are some really good tips. It doesn’t hurt to carry both.

Daisy@Everything Finance September 21, 2012 at 7:41 pm

I would never be able to go 100% without a bank. My work pays us by direct deposit. Plus, it’s dangerous to walk around with cash all the time. The way I see it, you can cancel a credit card but if stolen, you can never get cash back. Plus, you can get a lot of rewards for using a credit card. As long as you pay it back every month, I don’t see a problem.

The Financial Planner September 22, 2012 at 1:27 pm

I think that this method could be advantageous for an individual who does not have much savings and is not technologically advanced.

If those two criteria are not met, the cash only method has too many disadvantages to be worth it. Namely:

1. Holding large amounts of cash uninsured is very risky. As others have mentioned you can be robbed or a natural disaster can take out all your wealth. In a savings account you are insured against loss by the US government.

2. You completely miss out on any opportunities to earn interest or invest

3. It is much more difficult to track where your money is going. If you use a credit card you know exactly what categories you are spending on. With the cash only method you can keep track of this as well, but it will take far more effort.

Ashley September 25, 2012 at 6:27 am

I usually just go with a credit union, they have lower fees than banks and I don’t have to worry about carrying around a whole bunch of cash that makes me feel unsafe.

Soullfire September 27, 2012 at 8:34 am

Looking at the comments it seems people are missing some key points about having a bank and credit accounts.

First, I don’t believe anyone has mentioned that your savings are insured up to $250K. If you keep your money at home or hidden, you have no such protection and private insurance will only cover a limited amount of cash. This fact alone means you are taking on a huge risk of financial devastation through theft, fire, or forgetting where you hid it! Can you imagine the risk you carry if walking around with thousands of dollars to make a big purchase or getting a money order!?

Next, you greatly raise your risk for fraud. Once you pay for services in cash, they have your money and if a problem with the service or product is discovered, you have to solve the problem yourself. With a bank/credit service, you can stop payment and report fraudulent service providers.

Next, you don’t develop a credit history which can have a serious impact on your life. With regard to credit, having little to no credit history is viewed almost the same as having bad history in the eyes on banks. They want to see proof over time that you’re able to pay back what is borrowed in a timely manner. The time may come when you will have a need for having good credit such as starting a business, buying a car/house, traveling, etc. It is far better to have good credit and not make use of it rather than need it and not have it.

Your credit record can also be reviewed by prospective employers,utilities and apartment rental companies among others as part of their approval process. People with little/no credit history will be at a disadvantage against those with good ratings and ironically, will be grouped in with those with bad credit history.

Lastly, those on a cash only system lose out on getting any banking interest or investment income. Money on hand will lose value over time due to inflation. $100 tens years ago could buy a lot more than it can today. With no protection against inflation erosion, one’s net worth and buying power will continue to degrade over time.

The “freedom” one may feel from not having to deal with the banking system comes at a significant cost in today’s modern society.

Dee October 2, 2012 at 5:44 pm

Within the next year or so, the US government will make automatic deposits for pensions mandatory. Canada is going to it for all government payment in the next three years. Good luck with no bank account.

Daniel October 13, 2012 at 11:41 pm

Spending money that one doesn’t yet have is never really prudent. By living “cash only” I believe people can make a huge difference in the quality of their life and ensure that they’re spending money that they’ve already earned !!

Maggie@SquarePennies October 26, 2012 at 10:38 pm

If the only way you can control your spending is to use cash and the envelope system, then it makes sense. We use a cash-back credit card for everything we can. We pay almost all our bills online & that saves the stamps and envelopes needed to mail in a money order, not to mention the cost of a money order. The main thing for us is convenience, but to each his own.

t November 11, 2012 at 10:09 pm

a note to soullfire: my 65-yr-old mom never bought on credit in her life. last year she said she wanted to buy a house, so we went to the bank & guess what, she had a credit score over 800. so much for the ‘no credit is bad credit’ myth. fact is, your score goes up just by getting older.

as for cash-only, thanks for this blog, very useful to now i’m not the only one out here who has come to the realization that the chances of some lone evil-doer beating me over the head for my cash is way more remote than some tech-jerk-off who swipes my account info (and all the personal info that comes with it).

and the chances of that random tech-jerk-off appearing is waaay more remote than all my personally identifying info being stacked into a database & used to control me (google ‘safran’ cuz that’s the foreign-based global corp. that your dmv contracts out your driver license to- their motto is something like: ‘we monitor & control the secure movement of goods & people through multibiometrics’.)

so i think cash is brilliant.

one last thought: cash only and banks might be compatible, in that a security box cost maybe $20 a year. not ideal they say, but maybe not a bad option when considering that a savings earns .05% and a mattress has the obvious drawbacks.

cool site.

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