Budgeting | Personal Finance | Article

Would We Spend More Going Cashless? I Tested it Out.

by Annie | 19 Dec 2018 | 5 mins read

Cash is dying.

With more and more payment alternatives such as digital payments through our smart devices, there’s more competition for dollar notes now than ever before.

With the Singapore government aggressively pushing plans for the society to become less reliant on cash transactions, it is not inconceivable for us to experience a fully cashless future.

However, past the convenience it offers, there may be implications for us.

One clue would be looking to the credit card – arguably the OG cashless payment system.

A study published in 2003, observed that credit card users spent more versus cash users. One reason is the removal of the salience of cash, in other words, the pain of having to fork over real money.

What then, if our society goes fully cashless? Would we see the same behaviour replicated and our spending to increase? To find out, I did a small experiment, spending a week using only cash, and another using only cashless-payments.

Week 1: My Cash-Only Week

My teenage years in the 2000s were defined by struggling to find an ATM, and then standing in long queues, I desperately wanted to avoid that. I started the week by going to a bank and withdrew $350 – my weekly budget for daily expenses, inclusive of some shopping I had planned.

The most noticeable result of this was having a fat wallet, something I’m not used to anymore.

The bulk of my money went to meals. I ate out for most lunches at hawker centres, which was easy enough to pay for. I cooked my dinners, so grocery shopping meant buying food ahead for the next few days.

Unfortunately, being able to only pay by cash meant that I couldn’t use the self-checkout counters in supermarkets. This meant having to wait in line behind several packed trolleys with my little basket of chicken and bok choy for the next 15 minutes.

I miss you, self-checkout counters ?

The other struggle came with non-food related purchases. It was the week of Good Friday sales, and I had planned to do some shopping.

I wanted to buy some new workout clothes, but paying for anything above $100 with cash became a struggle to justify, despite being a responsible adult, and planning for it beforehand.

My total purchase came up to around $150 (ouch).

When a transaction empties out your week’s worth of cash (coupled with perhaps underestimating your own daily spending) you can’t help but start to question,“do I really need this?”

You’ll also start thinking, is this pair of new yoga pants really worth eating caifan for the rest of the week?

But anyway, the yoga clothes busted my $350 budget for the week. I was left with the all-too-familiar feeling of having no cash in my wallet, so off to the ATM again.

Verdict – I hate cash. It makes spending money so hard and time-consuming. But at the same time, I was especially aware of how much I spent that week (sans yoga pants) a whopping $255.

But for a more useful comparison, I narrowed things down to just my expenditure on food.

Total spend on food, $120

Week 2: My Cashless Week

Food courts with cashless payment options save the day!

This week was a breeze. Armed with my credit card, paying was so easy. Visits to the supermarket were hassle-free at the self-checkout counter.

I felt more freedom being able to eat whatever I wanted, wherever I wanted. While I tried to frequent food courts with cashless payment systems, I must admit my spending went a bit haywire.

I found myself happily spending more than I usually would on food – my average cost-per-meal went from $4 to $8.

Even hawker stalls, like this one, are slowly adopting QR code payment solutions.

The one time I did break the cashless-only rule was when I went to a hawker centre in Chinatown with some friends. In my excitement to get some claypot rice, I forked over a $10 note without thinking.

The adoption of cashless systems in older hawker centres is understandably slower, but like any Singaporean I’d happily queue for my food, even at the ATM.

Never change, hawker centre aunties and uncles, never change.

Verdict – the easier it is to pay, the faster the money goes. In my cashless week, I was significantly less aware of how much I was buying. The total amount spent at the end of the week came as a shock. I should probably be checking my bank statements more often. Meh.

Total spend on food, $150

My Findings

While my experiment was hardly scientific, and the difference in spending does not seem staggering. I definitely felt going cashless put fewer obstacles between me and parting with my money, it was just a bit too easy to spend.

The key, at the end of the day, is awareness. Without the tactility of cash, one needs to set time aside for spending awareness.

Checking your bank statements regularly or writing down your expenses can go a long way to reminding yourself of your budget.

That doesn’t mean that cashless payments are all bad. With perks such as cashback on credit cards, if used wisely, can actually help you save some money.

So is it possible to go fully cashless? Yes, definitely.

In fact, it’s much more convenient than paying with cash only in this day and age. Cashless has crept up on us, it is now (almost) everywhere, and there is no going back. The onus is on us to find new ways of staying fully aware of our spending.