10 Reasons Why Cash Is Still King

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10 Reasons Why Cash Is Still King BY NILUS MATTIVE for Daily Reckoning

Have you ever tried paying for a plane ticket with cash? It’s not easy.

Better yet, try renting a car with cash — good luck. There are some things today I can’t imagine not paying by plastic or through my mobile device.

And I’m not the only one…

According to an ING International survey conducted two years ago, nearly one third of U.S. citizens never or rarely carry cash, and 34% said they would go completely cashless if they could.

As mobile payments become easier and more readily available, the need to carry cash and plastic is quickly becoming less important, or so it seems. 

Also with savings interest rates almost non existent, it might seem foolish to hold a lot of cash in your portfolio.

But, I’ll happily argue that plastic, mobile payments, and traditional investments haven’t dethroned the king yet. In fact, I can think of 10 reasons why you still want to keep cash on hand.

Cash-Only Transactions

While there are lot of plastic-only transactions these days, the world still has quite a few places where greenbacks are the only accepted method of payment.

Taxis, family-run restaurants, and small mom-and-pop shops will typically only accept cash or issue a surcharge on small purchases if you wish to pay by credit or debit card. So, it’s a good idea to have some cash on hand, especially when traveling.

For Larger Purchases

Surprisingly, cash is becoming more necessary for larger buys these days, like a home or car. Cash can give you a leg up on buyers in a competitive market if you have a lot of it on hand.

Also, more lenders are beginning to require higher down payments, so without the necessary cash, you might miss out on your dream home.

Emergencies

Emergencies are unavoidable. Your transmission goes, your roof starts leaking, or you run into any number of medical or dental-related emergencies that leave you uncovered under your normal health insurance plan.

For these rare instances, it’s best to have at least 6 to 9 months of cash in a checking account you can easily access. This will allow you to pay for these unexpected expenses without having to incur high interest debt.

Avoid Interest and Fees

Speaking of interest, by sticking to cash you can avoid running up debt on your credit cards. This will protect your credit score, and you won’t have to worry about spending beyond your means. You also free yourself from the stress of having to make monthly payments on different purchases and credit cards.

Liquidity

A stock can 10x in value, but you can’t use it to pay your next grocery bill. The same goes for bonds and CDs.

Sure, you might get a much higher interest rate if you lock yourself into a 10-year treasury bond, but that money is tied up for 10 years. If you want to pull it out early, you’ll face stiff penalties that could erode all your earnings. 

The advantage of cash is you can spend it however and whenever you want. Keeping some on hand gives you the luxury of waiting until your CDs or bonds fully mature before you pull out.

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