Using cash to pay for anything is so last millennium. In modern society, we have smartphone wallets, one-click buying, and digital payments. Are we better off because of it? There's no denying the convenience factor. Always having purchase power, without the burden of carrying paper or metal currency, is deemed one of the greatest "advances" of the modern age.
To be clear, we're not talking about those pieces of plastic you get in the mail after filling out a credit card application. Credit cards are on their way out. Digital payments are the new medium of exchange. We set our bills on autopay, transfer money using our phone, and get our paychecks direct deposited. There's no cash in sight. Let's examine the effect of that on our finances.
Digital Payments Destroy Our Anonymity
The IRS and government regulators love digital payments because there's no anonymity with them. Paying cash was anonymous. The recipient didn't know or care where it came from because the cash itself was the only thing of value to them in the deal. Digital payments can't provide that. Your personal information is a part of the transaction.
Security protocols from payment processors are supposed to protect personal information, but hackers can get through encryptions and firewalls if they set their minds to it. How many data breaches have you read about in recent years? No one ever "hacked" your cash. There's a good chance the person you last gave twenty bucks to doesn't even remember your face.
Think about this from a financial perspective. Your funds will disappear if a hacker gets your personal information and bank account numbers. Those auto-payments you have set up will be rejected. You'll end up with late payments, a plummeting credit score, and no money for essential expenses. That's an extreme situation, but it can happen.
Digital Payments Make Spending Too Easy
We're not advocating for the return of an all-cash system. Digital payments are good when used properly and done through secure websites. Yes, anyone can be hacked, but vigilant security teams keep the thieves at bay. Unfortunately, that's not the only challenge consumers face. Their worst enemy in the digital world is their own behaviors.
Digital payments make it too easy to spend money. Folks who have difficulty budgeting their spending with a cash system often get in real trouble when they start using digital payments. In the absence of an accounting system or checkbook ledger confusing them, they spend more than they earn. Sound familiar? You're not alone if you're in this situation.
Managing Your Digital Payments
We've already summarized the problem. How about a simple solution? If you're using digital payments, as most of us are, you should set up a budget and a spreadsheet to keep track of any auto-payments you set up. Know what's coming and live within your means. Once you master that, you can enjoy the convenience of this technology.
Are digital payments bad? Absolutely not. They've helped to lower person-on-person crime rates and made money laundering more difficult. They also simplify currency exchanges when you travel. We've even seen digital currencies adopted by nation-states as the national currency. That is the world we live in. Embrace the change but understand the pitfalls.
Press Release Service by Newswire.com
Original Source: Credello: Can the Convenience of Digital Payments Wreak Havoc on Your Finances?
