Going Cashless? How to Keep Up with Debt ManagementDec 06, 2016
How often do you use cash these days? The convenience of newer digital payment methods like Apple Pay, RFID bracelets, mobile payment apps and tap-enabled credit cards has more and more Canadians adopting a cashless approach when purchasing goods and services. According to a recent Bank of Canada report, less than half of the purchases in Canada last year were made using cash, and many Canadians expect to increase their use of digital payment methods by the year 2020. Convenient or not, there can be a down side to digital pay, including the potential for this type of technology to cause problems when it comes to money and debt management.
If you are embracing any or all of the different digital payment methods, here are two things you should be mindful of:
1.) Managing your debt
Using newer digital options to pay for goods and services is so easy, it almost feels like you aren’t even spending any money. Herein lies the problem. Counting out your dollars and cents when making a purchase evokes a tangible feeling of spending. Even the need to swipe your credit card and input a pin number to approve your transaction reinforces the act of spending. Without these kind of limitations, it’s very easy to spend more than you mean to. In fact, a 2012 report from MasterCard shows that, when given a tap-enabled credit card instead of a regular credit card, the average individual actually spent 30 per cent more than they previously would.
And then there’s the issue of planning. Paying by cash requires you to think about how much money you will need to withdraw from your bank account ahead of time. With Apple Pay or other mobile payment methods, you simply flash your smartphone and the transaction is complete. This can lead to lack of forethought and can quickly evolve to a lack of financial planning. But adopting a cashless approach should not mean going budget-less as well.
The best way to keep your debt management on track when you’re using digital payment methods is to plan ahead. Start by preparing a budget. Failing to budget can quickly disrupt even the most carefully made debt relief plans. Keep track of your spending, making sure your spending is in line with your budgeting goals. Online apps like Wally and Mint can help you do just that and can also allow you to set and monitor your financial goals and priorities.
2.) Keeping your finances safe
Not only is there a risk of ruining your debt relief plans when using digital payment technologies, this type of technology can also put you at risk for cyber fraud. A recent study shows that over half of Canadians were concerned about their personal info when using a mobile payment app and only 22 per cent expressed complete confidence that their mobile device payments were secure.
There are a few steps you can take in order to protect against cyber fraud. Always ensure that your wireless network is secure and only purchase online payment apps from a recognized source. It’s also a good idea to ensure that your mobile device locks after a period of inactivity. For more tips on cyber-security, visit the Government of Canada’s Get Cyber Safe website.
Judging by the high adoption rates, it’s likely that digital pay is the financial future. Prepare for a cashless world by becoming more knowledgeable about cyber security and take steps to safeguard your information. It’s also a good idea to consider how digital pay could affect your spending habits and debt management strategy, then, create a plan to manage your money and your debt in the digital age.
Do you prefer digital payment methods over cash? How do you avoid debt management issues and other financial problems? Join the conversation and share your thoughts with BDO Camrose using the hashtag #BDODebtRelief.