As technology advances, the way Canadians buy things continues to change. Cash purchases are declining as credit, debit and digital payments are on the rise. But this doesn’t mean cash is going away. It still plays an important role in the Canadian economy and at the individual level.
The Decline of Cash Purchases
In a 2009 Bank of Canada (BOC) survey, Canadians were asked whether or not they had “cash on hand.” Forty-seven percent of respondents said “no” – meaning, they had no cash in their wallet, purse, or pockets. By 2023, this number rose to 80%, demonstrating a decline in the number of Canadians who carry cash.
The same BOC survey reports a:
- Decline in cash transactions
- Increase in credit card transactions
- Increase in online transactions
- Decline in offline transactions (which dropped in 2020)
Do Canadians still support cash purchases?
While Canadians generally embrace new payment technologies, there’s still room for cash. A recent study by Payments Canada found that 87% of Canadians still use cash. Of this group:
- 31% use cash for day-to-day purchases like paying a friend, and buying a coffee or snacks
- 32% hold cash for emergencies
The study also found:
- 55% of Canadians have no desire to go cashless
- 13% of Canadians have gone completely cashless
- 49% think Canadian stores will go cashless in the next 10 years
- 52% of Canadians are concerned by the prospect of cashless stores
While the majority of Canadians still use cash in some capacity, certain groups rely on it more heavily. For instance, older Canadians are significantly more likely to use cash, as are low-income groups or people who find it hard to access credit.
Advantages and Disadvantages of Cash
Using cash to make payments comes with a variety of pros and cons, including:
Pros
- Emergency preparedness. With cash on hand, you’ll never have to worry about the credit or debit machine being offline or inaccessible.
- Immediate transaction. There’s no waiting, transfer, or processing time. Once you hand over your bank notes, the transaction is complete.
- Lower cost. Credit cards charge transaction fees paid by the merchant and cut into their bottom line. Merchants often have to raise prices to account for fees. When you use cash, you can support local businesses by helping more money stay in the community versus going to large financial institutions.
- No interest. Cash is cheaper than other forms of payment like credit cards because you don’t have to pay interest.
- More privacy. You can’t track a cash bill the same way you can track an online or credit card payment. Credit, debit, and even prepaid cards are all tracked by financial institutions. Any purchase you make with your phone is traced by your phone provider.
- Wide acceptance. Cash is accepted pretty much everywhere.
Cons
- It’s dirty. Money gets passed around and can get pretty dirty. Payments Canada reports that 26% of Canadians said they feel they need to wash their hands after handling cash. This was the reason many people switched to alternative payments during the COVID-19 pandemic.
- Can’t use it online. With a move towards more online purchases, this is something that you can’t achieve with cash.
- Can’t build credit. If you’re trying to establish or build your credit history, you can’t do this with cash.
- Less security. If you lose your wallet or your purse is stolen, there’s no way to get your cash back.
- Less convenient. In the Payments Canada study, 16% of Canadians found paying with cards was more convenient than cash.
Advantages and Disadvantages of Credit Cards
There are also pros and cons when using credit cards to make purchases, including:
Pros
- Earn rewards. Many Canadians use credit cards to earn rewards or points that they can redeem for travel, merchandise, gift cards, or cash back.
- Fraud protection. If your credit card is stolen and someone uses it to make a fraudulent purchase, the maximum you will pay is $50.
- Build credit. When used appropriately, a credit card can help you establish and build your credit history. Your credit score affects important financial decisions like whether or not you can secure a mortgage or car loan.
- Convenience. Credit cards, specifically Visa and Mastercard, are accepted almost everywhere.
- Buy online. With a credit card, you can make a purchase in-store, over the phone, or online.
Cons
- Fees. Each time you swipe or tap, your purchase can cost up to 2.4% more than if you use cash. Sometimes the merchant absorbs this cost, making it more expensive for them to do business. Other times, this fee is passed along to you. There are also annual fees, and late fees to consider.
- Interest. If you don’t pay your credit card balance on time and in full each month, you’ll have to pay interest. Many credit cards charge high interest rates that can make it easy to accumulate debt.
- Credit card scams. Scammers have a range of ways to steal credit card information. From hacking into computers to sending fraudulent emails or text messages asking for your credit card information and often, unless we check balances regularly, we may not even notice the scam until much later.
- Overspending. It’s easy to overspend with a credit card since you don’t see the physical cash going out of your purse or wallet.
- Damage your credit. If you don’t pay your bills on time every month, using a credit card can damage your credit score.
Other scenarios where you might choose to use an alternate form of payment to cash include:
- Large Purchases. For instance, if you’re buying a car or boat, you might feel uncomfortable walking around with a large amount of cash. If your money is stolen, there’s no protection, the money’s gone for good. A card offers more theft protection for large purchases.
- Paying rent. You might find it more convenient to use an e-transfer versus bringing cash to your landlord. Plus, it’s nice to have a paper trail of the transaction.
- Expensive electronics. Some credit cards offer purchase protection and extended warranties which can come in handy on big-ticket purchases.
- Insurance. When renting a car or purchasing an airline ticket, you might choose to use your credit card to take advantage of extra insurance.
Speak to a Licensed Insolvency Trustee
Whether or not you use cash or an alternate form of payment is up to you. However, if your goal is to stay out of debt or avoid Bankruptcy, you may want to speak to a Licensed Insolvency Trustee (LIT) about the benefits of using cash. A Licensed Insolvency Trustee is a debt expert who can assess your finances and help you make informed choices about how to deal with financial difficulties. For a free, no-obligation consultation, call 1-888-371-8900, or complete our online contact form.
