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The Cost of Cash

posted by N26 • Product • February 4, 2016

Whether it’s politics or business, there’s an increasing amount of decision makers in Germany who have doubts in the future of cash. We’ll explain here why we support this trend.

 

Let’s get you up to speed on the ongoing debate. Germany’s SPD party has already announced its intention to get rid of the 500€ bill as well as outlaw cash payments over 5.000€. Member of Parliament Jens Zimmermann was quoted in the Frankfurter Allgemeine Zeitung: “The 500€ bill does play an important role – in criminal and other dubious environments.” But it’s also decision makers in business who have cast their doubts on cash’s future. John Cryan, who was recently named head of the Deutsche Bank, believes by 2026 Germany will be a cashless society. Finally, a vision from a traditional bank we can get behind!

 

Macroeconomic costs

Cash needs to be printed, continually inspected and then transported to and secured in safes. That costs the German economy each year over 10 billion euros. That’s not to mention all the illegal activity in Germany associated with cash (think about it – have you ever used a 500€ bill?)

 

10billions copy

 

Individual costs

It’s not just the economy and service providers that are affected by cash. That also applies to the individual user. Even in the best times there’s no interest paid on cash and each year humanity has lost, hidden and forgotten an astronomical sum of cash. And that doesn’t factor in waiting in line at ATMs – after all, time is money.

 

Hidden costs

Every year German citizens pay around 150€ just to use cash (for example: to insure and maintain ATMs). A big chunk of those costs are picked up by the banks. And they account for those costs by sticking consumers with hidden fees. Even when traditional banks offer “free accounts,” there are usually costs invisible to the customer. Some examples include:

 

  • Surcharges for international transfers
  • General transfer costs
  • Minimum deposits
  • Costs for failed debits

 

The better alternative: down with cash!

We’ll give you a few more reasons to reach for the card instead of bills and coins. Have a few concerns about card payments? Don’t worry, we have answers!

 

  1. Spending controls: many fear complicated spending with a “credit card.” But case comes with a bigger uncertainty.. By taking a look at your statistics in the NUMBER26 app, you can track and control your credit card spending.
  2. Security concerns: do you get a bad feeling in your gut whenever you use your card? With NUMBER26 you’ll get an instant push notification following the transaction. That way you’ll always know how much you’ve spent.
  3. Small sums: you feel small transactions (the 3,50€ you spent to buy your buddy a beer) are better left to cash. Try Moneybeam! Then you can send your buddy money faster than it takes to reach for your wallet.
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How you can show cash the red card

 

Germans use their cards on average for purchases starting at 60€. But there’s actually no real reason for that. With functions like NFC chips – which makes contactless payments possible – you can speed up transactions for even small purchases. So economically it’s worth it to reach for the card, even for a quick trip to supermarket for a liter of milk.

  • Since June 2015 taxis are required to accept card payments – each business in fact needs to accept a minimum of three of the traditional credit cards.
  • In the big-box discount stores like Lidl and Aldi the trend towards credit card payments has been growing since the summer of 2015.

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Germany is lagging behind

Germans are still a bit critical when it comes to card payments. The leader in Europe are the Swedes. By looking to our friends up north, we can see just how much potential there is in card payments.

  • Swedes pay five times more often with cards compared to Germans
  • From 2010 to 2012 more than 500 Swedish bank branches completely switched to a cashless operation.
  • The government’s goal is to be 100% cashless by 2030.
  • Coins and bills are disappearing as a payment option on local transit.

 

What is your opinion on cash? Where do you pay with a card? When will Germany change its last bill? We’re looking forward to your opinion on the topic!

 

Sources: SteinbeisThe Guardian, FAZ, EARSandEYES