Modes of Money- Cash

Have you ever stopped to think how many different ways we can pay for something?  Here, let me get your mind rolling:

–          Cash

–          Checks

–          Debit card

–          Credit card

–          Money order

–          Bank transfer

–          Cashier’s check

–          Pay pal (and the like)

–          Bill pay through your bank

And I am sure there are more.  Is one form better than the other? What is the best form?

Some of us purposefully do not use certain forms of payment for a number of reasons.  Many experts suggest never using a credit card, but I will argue there are very acceptable and preferred times to use that over a check or cash.  Many of us will boast we never have cash on us, but is that being responsible, and thinking of what situations cash can be a lifesaver?

Over the next few weeks I will discuss our different types of payment options, or forms of money in general. Each has advantages and disadvantages. But when used properly, like any tool in your garage, it can make the job that much easier.


Cold Hard Cash– This is our most generic and simplest form. Cash is accepted everywhere, by almost anyone for really anything if you have enough on you.  When I say cash, I mean actual dollar bills. Not a debit card, credit card or even checks. You will want to keep the actual bills available to you, but only the right amount, which will be different for everyone.

Advantages– It’s tangible, so you know you exactly what you are getting, and where it is, and it is in your direct possession.  It is widely accepted. It doesn’t take a machine to use it. You can have cash in many different places (I suggest some at home, a few bucks in your car, maybe in your desk at work too).

Disadvantages- Cash is hard to track. If you lose cash, there is really no one to call to get your money back. Cash loses purchasing power over time, which is why you want to keep only the right amount of cash on hand, and have the rest in other modes working for you, and keeping up with or exceeding inflation.

My recommendations– Have some cash in many different places. Keep some on you at all times, put a tank of gas worth in your car’s glove box. Keep a mortgage payment worth in your safe at home. Beyond that, keep cash to a minimum, remembering that cash does not increase in value and is not backed by any insurance or government entity ( FDIC). There is a fine balance between liquidity (how quickly you can access your money) and depreciation (caused by the dollar losing value due to inflation, which is another form of taxes).  You want as much of your money working for you (in retirement, savings accounts, insurance or other investments) as you are comfortable with while holding on to as little that may be needed in tight situations (power goes out, unexpected purchases or your card is declined). Don’t mistake cash for a debit card. Most everyone will accept cash from you, not many will keep your debit card if they can’t run it.

Side note- Also, do not use the term cash for gold, precious metals, or other assets that could be traded or exchanged for other goods or money. Many of these appreciate in value, and will also be accepted as a trade. These items are in a special category of their own, and can be an important part of your over all portfolio, but for the scope of these posts, we will focus on the different forms our money can take and be used in our daily lives and transactions.