Posted by Mike Smith :: August 13, 2007 @ 7:19 am

Looking in a person’s wallet is no longer an accurate method of determining his financial means. Nowadays, a large stash of cash is more likely an indication that the person hasn’t entered the modern world than of his financial well being.

One of the main reasons for the lack of cash in our lives today is the increasing acceptance of alternative forms of money. Even a few years back, the thought of swiping a card for a small purchase at a convenience store would have been unimaginable. For one thing, merchants used to limit plastic transactions to larger purchases, of say $20 or more.

Secondly, keeping track of all your plastic transactions was much more difficult before the widespread use of computers. Lastly, swiping plastic doesn’t necessarily mean using a credit card. If it did, and you ran a balance each month, then small purchases would become very costly as interest became involved. Lending Club certainly wouldn’t recommend that approach! The growing acceptance and use of debit cards has allowed consumers to make cashless transactions without as many of the costs associated with credit.

With the increased use of online financial and investment institutions, consumers have also begun to realize that their money can work harder for them when it is not in the form of cash in their pockets. Transferring funds between different accounts has become so commonplace that you may be better off leaving the majority of your money in high-yield accounts until the moment you need to access it. In the manufacturing world, they call this just-in-time inventory management. In the money realm, it can be thought of as advanced cash management.

The removal of cash from our lives does have some drawbacks. You may find yourself helpless in situations where cash is required, such as at a neighbor’s lemonade stand. Also, if you do use a credit card as a cash alternative, then you may be faced with interest payments and fees for the convenience of having a card.

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