As CapitalOne likes to ask, what’s in your wallet? If you’re like many Americans, it might be pretty light on cash. You might not have a CapitalOne card, but chances are you’ve got at least a debit card, and likely a few credit cards. Cash is becoming less popular as time goes by, but it’s important to make sure you carry and least some with you.
In general, Americans seem to be lightening up their wallets overall. When Gallup last asked Americans about their credit card ownership in 2014, the average number of cards per person was 2.6 — which included the 29% of people who didn’t own any credit cards at all. Among people who own at least one credit card, the average was 3.7 cards. According to Gallup, those averages were the lowest ever recorded during the survey.
Meanwhile, a Bankrate survey (also from 2014) showed that Americans avoid carrying large amounts of cash, too. About 69% of respondents said they carried $50 or less in their wallets on a typical basis, with 40% saying they had less than $20 on hand. Just 7% said they carried $100 or more at any given time.
There are ongoing debates about which type of payment makes it easier to overspend on items you don’t need. One side of the argument says that you don’t mentally register spending as much when you swipe plastic, with one study saying you spend 12-18% more on purchases when you use credit or debit. However, Bankrate contends that people view the Hamiltons and Jacksons in their wallets as petty cash — making them more likely to part with it on frivolous purchases. “If you’re carrying more [cash], maybe you feel you have more, and you feel you spend more easily,” Joydeep Srivastava, a professor of marketing at the University of Maryland, explained to Bankrate.
How you spend your money is a personal issue, and easily controlled with a rock-solid budget you stick to. However, it does make sense in many cases to strategically carry some cash with you, even if you normally put your purchases on plastic. Here are some situations where cash is still king.
1. Travel emergencies
Whether you’re planning your next scenic road trip or you’re taking a flight at Christmas, it’s a good idea to carry at least a little cash with you for emergencies and unexpected costs. Forgetting money for tolls can cost you big-time, especially if you forget to pay online within the first week of driving through. Having AAA membership is great for if your car breaks down or you need a tow, but if you don’t have the roadside insurance, it’s a good idea to have cash with you to afford the towing costs. It’ll be bad enough that your car is leaking fluid; don’t make it worse by not being able to get your car to a garage quickly.
Trent Hamm, founder of The Simple Dollar, said he keeps four $20 bills tucked away in his wallet for these kinds of issues. “This is enough to cover almost every cash-based emergency that I can think of, such as paying a tow truck,” he wrote.
2. Going out to eat
You might put most of your dinner tab on plastic, but it’s worth it to keep some money in your wallet for the occasional lunch or dinner. For one thing, splitting the bill becomes much simpler when you’ve got cash to work with. “Otherwise, one person might get stuck with the whole cost if the other promises (and forgets) to reimburse later on,” MoneyCrashers advises. You don’t want to be the person who’s always forgetting cash and giving out IOUs to friends as they cover the tab. You should also realize that when mini “loans” like that are given out between friends or family, the lender typically never sees the money again. Avoid being on either end of an uncomfortable situation by making sure you have the cash to cover your portion, every time.
It’s also not a bad idea to carry cash for tips. Across the board, servers in sit-down restaurants will prefer cash, and it’s not always to unscrupulously hide that money from Uncle Sam. CNN Money explains that when tips are left on a credit card, management will often take a cut of that tip to cover the credit card processing fee they’re charged by American Express or Visa. As a result, servers get even less of the tip than you originally intended. In addition, cash tips can go immediately toward expenses, instead of being processed weeks later in a paycheck.
3. Your card isn’t accepted
Though it’s becoming more and more rare, especially with the advent of mobile payment processors, some retailers simply don’t accept credit cards or allow you to pay with debit. Cash-only storefronts, county fairs, arts and crafts shows, and other pop-up operations are more likely to avoid credit card fees, but they’re not the only ones. Some grocery stores like Aldi and WinCo refuse credit payments to keep operational costs low.
While you can normally predict when these situations will come up (you don’t visit the fair on a whim, normally) it’s still a good idea to keep a spare bill or two in your wallet.
4. Your card is suspended
Even if you pay your bills on time, every time, and don’t reach your card limits, your credit cards can be suspended with little notice. If someone compromises your card or your card issuer suspects fraud, they’ll suspend your account and leave you without your trusty payment method. This is overall a good thing, since it’s likely protecting you from suspicious charges. However, in the moment it can be a large inconvenience.
In most situations, you’ll be able to get a backup payment method, or even try another card if you’re at a restaurant or grocery store. Even so, it’s not a terrible idea to carry the cash Hamm talks about on The Simple Dollar, for last-minute emergencies.
5. Spontaneous office purchases
When a colleague offers to make a coffee run or pick up lunch, you’ll need cash to take them up on their generosity. Unless your business is footing the bill, you don’t want to stick your co-worker with awkward IOUs and a promise to “get them back next time.” If you forget, you awkwardly become the “cheap” co-worker, and no one wants that stigma.
For your budget’s sake, it might be less tempting to carry cash than to say no to extra coffee breaks, or lunches from the new deli down the street. However, carry at least a little cash allows you to chip in for office gifts for your co-workers, purchase Girl Scout cookies from the colleague who’s selling them for his daughter, or stock up the candy supply in the break room. The alternating payment system gets messy, as Bespoke Post points out, and it’s way easier simply to hand over the $5-10 you’ve allotted right away.
If you’re worried about spending that cash quickly and without good judgment, Hamm suggests tucking those bills away into a smaller, unseen pocket in your wallet. You’ll remember you have it when you absolutely need it, he wrote, but you won’t be as tempted to spend it just because it’s there. Out of sight, out of mind, still in your wallet.