FinTekNeeks

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Cash Remains King

Posted in Money

Not that any of our readers needed any more reason to hate banks and the banking system. The below snippet from an older article shows how unsafe your money is in banks, while also reminding you that you need to spend resources making sure you have the latest of everything – else you may not ever get your money back.

In February 2005, Joe Lopez, a businessman from Florida, filed a suit against Bank of America after unknown hackers stole $90,000 from his Bank of America account. […] However the court did not rule in favor of the plaintiff, saying that Mr. Lopez had neglected to take basic precautions when managing his bank account on the Internet

If money is stolen from your account, that’s your fault (my title)

Most of this post appeared on A.P. in 2015 by the same author of this article, which may have different pricing context for goods than currently.

Introduction

Banks. Keeping your money safe since … never. A few years ago, I experienced my own version of the above story. A charge appeared on my credit card that I did not make and I called the credit card company and challenged it. The claim took many hours and the result was that it held: I lost several hundred Dollars due to fraud, though you’ll rarely hear about this. When it happened a second time (yes, this was my fault since I kept the card open), I closed the card and will never do business with the bank again. I’m about to eliminate my other credit card as well, as I’ve lost faith in US banks and have realized that these institutions have failed all of us. While I start this post with security, I’ll also write why cash beats every other budget in the book because of its ease, as well as its negotiation power.

Cash is as secure as you are. You know how much anti virus software per year I have to pay to keep my cash safe? $0. Fraud happens, it takes forever to solve, and I’ve experience results where I don’t win when it wasn’t my money. With cash, the only dispute that I can have is with myself – did I keep it secure? If I don’t, that’s my fault. As far as I know, the credit card company committed fraud against me and refused to reverse the charge; what’s interesting is that they refused to let me close the card due to fraud, as they said I “did the transaction.” They forced me to keep a card that had fraud on it and, of course, it happened again. I realized that the only way to keep myself safe was close the card forever. Americans may comment that I should sue without realize that I would be wasting even more time doing this and receiving very little in return (is it worth to sue over $1200?). The bottom line: debit and credit cards are not safe. Like the story above this, when you lose a lot of money, you’ll realize only too late that it was never as secure as you hoped. Luckily, most people experience small fraud, which the bank knows is a waste of time to dispute.

Oops, I overdrew. Oh wait, I’m using cash. You know how many overdraft fees I’ve paid on cash? $0.

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Those expensive monthly service fees! “If you keep your money in our safe and secure bank, we’ll charge you $10 a month and 2% on every transaction you make (to the merchant)!” Contrast: I pay $0 a month using cash and can negotiate with the merchant to give me a 2% discount since I’m not using the scam credit card system (the 2-4% cut is how some credit cards offer rewards – they pay up to 2% of their cut back to consumers, yet consumers still overpay; how is that a reward?).

Cash rewards. Every now and then when I use cash, I get a dime or quarter that was made in the day when it was mostly silver (pre-1964 quarters and dimes are made of about 90% silver). That’s free money since the price of an ounce of silver in those days was approximately $1.30 (an ounce of silver is now $14.40). Unlike the above point, this is actually a reward.

ATM limits in bank crises. You’re a Greek and you can only withdraw so much cash because banks are limiting access to your own money. You know how much limits I have to the cash I have? As much as I decide. Also, I pay $0 in ATM fees on my own cash in my pocket.

Cash budgets. A lot of personal finance is automation vs. budgeting and the debate is a waste of time. The easiest way to combine both is to use the cash budget technique, which is easy, powerful and can be fun, if you let it. The steps are simple:

  1. Set aside enough cash to cover your full budget, from necessities to some play money.
  2. Only use that cash each month. All of your other excess money will go into savings, retirement, etc, in places you don’t have immediate access to.
  3. Try to conserve as much cash as possible; with cash budgets this is easier because you visually see how much you’re using. These budgets are powerful since they visually connect the person budgeting to the result – when I worked for a bank, I saw how many people easily succeeded with a cash budget.
  4. As you get better at reducing unnecessary expenses, the fun is watching your pile of cash grow in time – this visually connects a person to the result.
  5. Whether you want to reward yourself for saving, or whether saving is your own reward – that’s up to you.

When the money is gone, it’s gone. Watching your own pile of cash shrink is a motivator to make it last as long as you can, and what’s fun about this is that you can play games of “rollover” cash where money you saved in one month rolls over to the next month. When I worked for the bank, I found it interesting that cash budgets made some people see budgeting as fun and part of the reason I think is that cash budgets have power through the visual of seeing money spent and saved.

As for businesses who don’t take cash, stop doing business with them. Same with bills; you’d be surprised how many companies allow you to “load” cash on a card, or with the bill itself. For instance, on my first cell phone I pre-loaded two years of bills with cash because I hate receiving bills. The cell company loved it. If an institution doesn’t work with you, assume they’re buddies with the bank, and terminate the relationship. In capitalism, consumers have power – it’s called don’t give the companies your money, or create the competition against them and put them out of business.

I think that using a low limit pre-paid or credit card is wise to have in some situations – the key here is that it’s low limit or prepaid as it forces limits in place. This also protects you from fraud as a scammer has to know what the limit is in the first place – imagine you have a $100 limit and the scammer tries to steal $700. Not happening man. Be careful with credit cards here; some cards will allow someone to break the limit and charge huge fees – stay away from these cards.

Negotiation. Cash is power. When you waive money in front of a merchant, he knows what you have. Have you ever tried to buy a car in cash? Watch the expression on the seller’s face when he knows you have the money – “Gimmie, gimmie, gimmie!” But you have power over him because he knows you have it and there’s no “credit check” or delay of any kind; it can be locked in immediately. Cash is power in the present – it is absolute. Cash gives you the ability to get huge discounts because merchants don’t have to worry about whether you have the money. When you buy $1000 worth of clothes, and they see the $1000 in cash, you can pick up your cash and leave. In the credit card scenario, while negotiating, the merchant has to wonder if you could even get approved in the first place; and once you swipe, it’s over – they have your money. Sure, you can dispute the charge, but as I found, you may not win the dispute. Cash is the ultimate sales proof of concept – you’ve proven you have assets you’re willing to trade.

Using cash is stealing from a bank. US banks stole from taxpayers and currently steal from them by making interest off their deposits while paying them next to nothing in interest. Every Dollar you have in cash is less money US banks have; it’s like flipping the bird at US banks. Nothing makes credit card executives and bankers more angry than using cash, so just think about all the anger you’re causing in the banks every time you use cash. As Saint Paul warned, “You reap what you sow.”

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Exceptions and Conclusion

In some jurisdictions, cash is not king, while resources or commodities may be. A humorous story about Brazil is that the people in Brazil prefer to actually have something physical than trust cash, and I can understand why when you consider they’ve seen inflation above 100,000%. Additionally, some Americans – like our business owner – found out the hard way that digital money isn’t safe either. Physical money is as safe and strong as you allow it to be, but it will come with responsibility.

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