Could you save by relying on cash rather than a card?

Most South Africans have at least one bank account, for a range of reasons. However, cash has proven to be resilient during Covid, with research showing an uptick in its use.

We find out why cash has remained king in South Africa. We then look at the benefits of using cash and consider whether bank cards may still, ultimately, be superior.

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The resilience of cash during the pandemic

In a press release, Ghita Erling, CEO of the Payments Association of South Africa, says that South Africans have become more dependent on cash during the Covid-19 pandemic.  

She explains that, surprisingly, cash has proven to be resilient during uncertain times. Research shows that nearly one in five South Africans don’t have bank accounts, and one third prefer to withdraw their money in cash rather than keep it in their bank accounts.  

“This trend is more prevalent among social grant recipients. SASSA statistics indicate that 95% of beneficiary funds are withdrawn within seven days of being deposited,” says Erling.

“Another SASSA report suggests that the reasons for this behaviour include, among other things, a mistrust in digital services, uncertainty about how to use bank cards, and the opportunity costs of managing this, such as taxi fares to travel to ATMs,” she explains.

Besides this, Erling points out that many South Africans live in areas where digital payments aren’t accepted by local vendors.

“This may be due to the costs involved, but more likely because the use of cash by their patrons is so prevalent that they see little value in implementing card services,” says Erling.

The benefits of paying with cash

South Africans who prefer to use cash may have realised there are also unique benefits to doing so. For example, you may be able to negotiate a better price – otherwise known as a cash discount.

Just like customers, merchants pay transaction fees on the money they receive. To help them reduce these costs, they sometimes offer discounts to clients who are willing to settle their bills immediately with cash.

This also guarantees that their bills are paid on time, and it removes the lag time for a transaction to come through to the merchant’s account.

For instance, if you go to the dentist, they may offer you a 5% discount if you pay your bill immediately in cash. However, if you choose to pay by card, you will have to pay the full amount.

Paying with cash can also protect you from spending recklessly. When you have your bank card with you, it may be easy to swipe away your money because it’s at your fingertips. However, if you leave the house with a set amount of money, you won’t be able to overspend, even if you’re tempted to do so.

Using cash while out and about can also protect you from “tap and go” schemes. Criminals have learned how to exploit the tap function on certain cards, and this can lead to you being unknowingly robbed while standing near a thief.

It’s still possible to get mugged, and if this happens you will also lose your money. However, you may lose less money, because criminals will be restricted to taking what you have on you, rather than what’s available in your bank account.

Are bank accounts ultimately superior?

Cheslyn Jacobs, executive of sales and service at TymeBank, says that certain bank accounts offer low- or no fees and many transactions are free, depending on who you bank with and the account you choose to open.

He explains that you can also earn additional benefits, such as rewards points, cash-back deals, and opening bonuses when you sign up for a new account. 

Fred van der Westhuizen, card operations manager at the Payments Association of South Africa, notes the following benefits of using a bank card for transactions.

The benefits of using a bank card

1. A bank account keeps your funds safe and secure. It also prevents you from walking around with large sums of money, which could make you a target for criminals.
2. Creating a banking footprint and building a financial history will benefit your credit score and future finance applications. You can improve your credit score by paying with a credit card and making repayments timeously.
3. If you purchase goods on a credit card, you will have access to credit life cover, which will protect you during unforeseen circumstances, such as being retrenched.
4. Making use of contactless payments offers great sanitation benefits compared to handling cash, especially with Covid-19 remaining a risk.
5. There has been an exponential growth of e-commerce transactions. Online goods and delivery services can only be procured with electronic transfers or card account details.

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