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How Cashless Transactions Impact Canadians : Net Worth Update Oct 2019 (+1.32%)

Cashless

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Cashless transactions in Canada have become a trend that is impacting Canadians and the way they Shop, Save and invite Debt.

I’m not sure if Canada is moving towards a cashless society as digitalization slowly pushes cash and cheques to the side.

However, the impact can be either a smart move or a desperate attempt at getting consumers to spend more money.

Sweeden, for example, is nearly 80% a cashless society and I’ve been told if you plan to visit bring plastic with you.

So, the trend is out there and how long it takes to spread if it does no one knows.

Cashless Transactions

cashless economy

What are cashless transactions?

Simply put, cashless transactions are when you make payments via your computer, smartphone, credit card, in-app purchases, contactless or online electronic fund transfers.

Cashless transactions are digital transfers using your computer eliminating the physical use of banknotes or coins to make a payment.

While cheques and cash are declining because of cashless transactions businesses are being forced to switch the way customers pay for goods and services.

I remember a time when Dollarama only accepted cash or debit card (cashless transaction) but now has included credit cards.

We don’t carry cash as we used to and Canadians depend on being able to use cashless transactions as a form of payment almost everywhere.

According to a Payments Canada report in 2018 on Canadian payment methods and trends, there has been a fairly large decline in the use of cash and cheques.

Since 2016 payment trends in the following areas have shown to favour cashless transactions.

  • Cheques -8%
  • Cash – 2%
  • Debit +7%
  • Credit +4%
  • Electronic Fund Transfers +4%

Those numbers may not seem dramatic however let us look at the impact on cashless transactions since 2012.

  • Cheques -28%
  • Cash – 19%
  • Debit +33%
  • Credit +33%
  • Electronic Fund Transfers +23%

As you can see those numbers seem far more dramatic than those above and I don’t think we will see a decline from a cashless perspective.

Payment Options

Canada Payment Market

Source: Canada Payment Market Trends 2018

What method do you use for point of sale (POS) purchases?

  • Cash
  • Credit
  • Debit

With Black Friday and Christmas upon us sitting behind a computer to shop is far more attractive then venturing to the mall in cold weather.

During my first years in Canada with Mrs. CBB, I recall getting up at 5 am to be at Walmart or Best Buy for Boxing Day sales.

That only lasted two years from 2007-2008 and then online shopping for Boxing Day deals took over.

Who wants to stand in the cold in hopes of getting a limited quantity of a product that is probably last year’s model?

Staying at home in your pajamas with a hot cuppa tea seems far more compelling for Canadian consumers.

Perhaps you might disagree with me then you’re far more adventurous than I am in the cold.

Stick With Cash When You’re Broke

Canadian Cash

When you are in debt you’re told to cut up your credit cards and use a cash budget.

The reason is that consumers have only a certain amount of money in the pot and when it’s gone it’s gone.

With credit and other digital means for payments, we’ve become a society with seemingly endless payment streams.

It seems like every time we leave the house Mrs. CBB and I ask each other if we have any cash on us. 

Times have changed where consumers would fill their wallets with cash to go grocery shopping or to shop at the mall.

Technology is one of the biggest reasons as to why we are becoming a cashless society especially when rewards are the motivator.

Apply for this credit card and get a 1% cash-back perk or earn double the rewards when you use our credit card. 

Marketing credit card applications and cashless transaction options have been either misery or celebration for Canadians.

For example, we have the PC Elite MasterCard with over 5 million PC Optimum Points which is $5000 worth of free stuff.

That’s free money that we would not have been given had we used cash for our transactions.

It’s rewards, incentives, and freebies from businesses that drive Canadians to jump on the cashless wagon.

Debit still trails credit due to lucrative rewards programs and much less debit use in e-Commerce and in-app payments.- Payments Canada 2018 Report

Not only that but for those people who use credit because they are short on cash it becomes a money pit.

Cashless Transactions Are Not Equal

Nevertheless, the problem is not every Canadian can get a credit card or use online technology to spend their money.

Some consumers have no interest in becoming a cashless society and are perfectly fine using cash and cheques as long as it’s available.

That was my father-in-law a baby boomer who had no desire for any other payment unless it was cash.

Education surrounding the use of credit and other forms of payment besides cash or cheque is very important given the way Canada is evolving.

Convenience Rules Cashless Transactions

According to the Payments Canada 2018 reportPayments Canada Trends Report 2018
Canada is the global leader in contactless debit card use.

Furthermore, that means we use our debit card more than other countries to buy low-value items such as food and coffee.

How many of you tap your debit card when you go through a drive-thru at Tim Horton’s or Starbucks?

Lots of you I bet.

Convenience matters to Canadians because far less of us want to scramble looking for coins when all we have to do is tap.

Another example is electronic fund transfers (ETF’s) where you pay for your household bills automatically from the bank.

I’m guessing plenty of consumers are paying for their bills this way as opposed to going into a bank or business.

That’s the way it used to be Mrs. CBB says of her mother who paid the household bills for the family.

She remembers going to Bell Canada with her mom’s monthly bill and waiting in a line-up to pay for it with cash or a cheque.

Here’s the catch though? If Canadians can pay for their household bills using credit to increase rewards they will do it.

This is why using a credit card for bill payments has been creeping up the payment ladder next to the ETF.

Pros of Cashless Transactions

McDonald's

  • Convenient
  • Rewards Points
  • Limited money trail (receipts)
  • Fewer currency notes being produced fewer costs for Canada
  • Less counterfeit money production and circulation
  • Money trail if you want there to be one
  • Profitable as cash is an idle asset unless it is in a bank.
  • Easier for accounting and budgeting purposes
  • Budget discipline as you are forced to manage your money wisely
  • Shorter wait times (ex; McDonald’s allows you to order via their app or in-store kiosk)

Cons of Cashless Transactions

  • Possible privacy information or data leak, account hacking
  • Scammers and fraud (enough said)
  • Overspending and going into debt
  • Forgetting your password
  • Possibility of phone malfunction or death of your phone by being run over by a car ( you get the point)
  • Customer error inputting the wrong data for payment possibly paying more than needed
  • Loss of freedom of your money (ex: money being held by the bank)
  • Extended credit to those that can’t afford it
  • Technology problems such as machines down, not working properly and other technical difficulties
  • Those living in rural areas might not have the technology infrastructure
  • Not everyone can afford a smartphone or data plan
  • Lots of people are unable to understand how to use cashless transactions
  • The customer ultimately pays for the costs of cashless transactions through increased prices to pay the middle man.

Cashless Transactions Canada Summary

POS= Point Of Sale via Canada Payment Trends 2018 Report

Cash continues to be the most widely used payment method by a slight margin, at almost 6.5 billion transactions.

Debit card transactions are the second most used POS payment instrument in terms of transaction volume.

Credit cards continue to dominate the POS environment in transaction value, as consumers and businesses migrate more transactions to credit cards to earn rewards.

Credit cards are also being boosted by more POS transactions shifting to online and in-app channels, where more than nine in 10 transactions are completed via credit card rails.

Canada has also become a global leader in credit card use as a growing number of Canadians use their credit cards for larger portions of their monthly spending.

Prepaid transactions are the fastest growing POS transaction type but continue to account for a small portion of POS volume and value (two and three per cent, respectively)

Consumers opting for more convenient and electronic methods of payment, such as contactless to purchase low-value items like food and coffee.

Equally important is why consumers choose the method of payment they do and whether their mindset has changed over the years.

Cashless transactions are here to stay but I believe we will continue to see cash and cheques as our main breadwinners for a time to come.

Discussion– I would love your feedback on the topic of cashless transactions whether you support them or not. What other pros and cons can you think of? Share your comments below and I’ll be sure to respond.

Mr.CBB

Net Worth Losses and Gains

October 2019

October 2019 Net Worth Losses and Gains

What happened to our money in October?

There wasn’t much difference in the amount of cash we had left at the end of the month when compared to other months.

It just shows that we haven’t spent much lately or bills haven’t been that expensive.

It helps when the bathroom renovation has ceased to withdraw cash from your pocket.

A healthy return on investments this month reflected from a surging market, but I’m holding out hopes that the market and our investments are going to grow at this rate for any length of time.

Understanding Net Worth

What Does Individual Net Worth Mean?

Net Worth is a snapshot of your financial health sort of like a picture or debt to net assets.

In simple terms, it’s a total of the value of your assets minus your liabilities.

We credit the growth of our net worth due to patience, perseverance, using a monthly budget and not giving up.

Your numbers may go up and down but don’t let the numbers scare you rather understand why and move on.

If you would like to use our budget I offer a FREE downloadable budget which I created and that you can use at home just like we do.

I don’t charge for it because I want you to save money not spend more!

There are tonnes of other free resources at Canadian Budget Binder to help you build your net worth.

Calculate Your Net Worth

October 2019 Preceding 12 Months Net Worth

Do you know how to calculate your own Net Worth?

We like to calculate our net worth every month so we know if we are still on track.

Some people calculate it yearly or quarterly but it’s up to you and how informed you want to stay.

Net Worth is only an estimate and not everyone uses the same type of figures to tally it up.

Some of you may not include vehicles like we do or leave out assets inside the home as we have.

You might be that person that believes that your house should be excluded.

It depends on what you want to calculate or what you can sell today and make money on for tomorrow.

Figuring out net worth is fairly easy as long as you know your numbers or monthly finances which means you need to do your homework.

Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number.

Understanding your net worth will help you determine if you are on track meeting or beating your personal financial goals.

It doesn’t get any easier than that.

Determining Net Worth

How to Determine Net Worth?

Net Worth = Assets – Liabilities

Why not go ahead and calculate your own using our Free Money saving Tool Net worth Calculator (Canadian Budget Binder 2012)

Financial Numbers

When budgeting anything is possible, we are proof of that although we still have a long way to go in our journey.

These are our numbers and our goals, not a means of comparison towards your own goals to others’ target goals.

We don’t care how much money others make or if they have a high net worth or if it is lower than ours as it’s not a competition.

I hope our experiences will help guide you along your financial path working towards debt freedom.

Not everyone has the same path in life.

Some of you may have had to start over like I did or go to school a second time and now have OSAP loans to pay back.

Others may have divorced, lost money in the stock market or other investments, suffered job loss, fell ill or injured on the job and so on but you can’t let that stop you from achieving your financial goals.

Some of you may have been given trust funds, paid-for homes, paid educations or perks in life that give you a financial kick-start and that’s OK too.

Earn It, Save It, Invest It, Build It

Remember what I said, “It’s not about how much money you make, it’s how you save it”.

The only reason people accumulate wealth is that they know how to save or invest it wisely even if they did inherit money or win the lottery.

The smallest improvements should mean big strides in working towards reaching your goals.

Sometimes we have to fail to learn and we’ve all been there. 

Money can be an evil force for some people especially those who have a negative attitude towards their financial situation.

I urge you to be optimistic and little by little with determination you too should see improvements if you want that to happen.

Canadian Budget Binder Net Worth Updates 2019

Click the links below to read our net worth updates for the year.

That’s all for this month’s net worth update but please check-in at the middle of December 2019 to see how we made out in November 2019 with our financial portfolio.

I’ll also be posting an end-of-year summary for 2019 along with a new budget for 2020.

~Mr.CBB

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