Back in your grandpa’s day, cash was king. Its reign is over now that anyone with a smartphone can tap into digital payments.
Digital and contactless payments join the credit cards taking cash’s place as the preferred way to pay, but they aren’t perfect replacements for bills and coins. With overspending concerns, the mobile wallet can pose a threat to your budget.
Don’t worry. Below, let’s lay it all out for you—both the pros and the cons—so that you can use your mobile wallet with confidence.
Why Cash is Going out of Style?
Let’s face it, cash is inconvenient; you constantly need to replenish bills as you spend them, and some retailers don’t even accept it anymore. To make matters worse, paper money earned a dirty reputation during the pandemic, as scientists exposed the average bill to carry a ton of germs.
With cash’s crown up for grabs, digital and contactless payments are primed to be the heir apparent. They’re simple and germ-free ways to pay for things you need.
Digital & Contactless Payments Act Like Credit Cards
That said, the mobile wallet isn’t without its downsides. It’s just so convenient that it can make you spend more money, more often.
This isn’t a new phenomenon. Credit cards have long since convinced people to overspend. With credit or contactless payments, you don’t have to fork over bills to make a purchase. Instead, you just click, tap, or swipe to get what you want.
Without a physical exchange of money, you don’t feel or see the loss of your money. Instead, just some online balance numbers change.
Conceptualizing this spending can be hard without the visual cues of money leaving your wallet. As a result, studies show you’re more likely to spend when using credit or digital payments. You also spend more when you don’t use cash.
Know the Role of Credit and Digital Payments in Your Finances
Let’s talk about credit in the form of borrowing. Credit cards, lines of credit, and even online loans provide some good lessons for using your mobile wallet with intention.
Normally, credit is something you rely on in emergencies. If you don’t have savings when your furnace breaks down, you can put repairs on a line of credit or take out an online installment loan.
The loan experts at MoneyKey recommend considering lines of credit and installments loans as potential options for unexpected expenses when your savings have run short. The online loans through MoneyKey are not designed for everyday shopping, and they recommend budgeting for every dollar you borrow, plus rates and fees. Tracking the cost of borrowing can help you understand your bills, if you’re approved for a loan online.
Apply Credit Logic to Mobile Wallet Spending
A mobile wallet plays a different role in your finances. It is meant to tag along with your day-to-day shopping — from the corner coffee shop to the grocery store. Sometimes, it’s connected to your checking account, but sometimes, it’s connected to a credit card.
In either case, the same rule from above applies to digital payments. Since its billing process is similar to online loans — cash moves virtually from one account to another — you need to budget intentionally for every dollar you spend. Tracking your spending can prevent you from falling into the credit trap of overspending.
Treat Your Mobile Wallet Like its Cash
At its core, this article is here to tell you to treat your mobile wallet like its cash. Only spend what you can afford to pay by the due date. This simple rule can help you reduce spending and use your mobile wallet responsibly.