Covid-19’s impact on cash and coins: The pros and cons

“Card only please” – a phrase you’ll now commonly hear in shops, cafes, restaurants and more. Since the start of the Covid-19 pandemic, we’ve all been encouraged to pay by card to reduce contact between people. The question is, is this cashless society here to stay indefinitely?

Will the UK become contactless for good? The trends are certainly looking that way. According to UK Finance, cash was used for just 17% of all payments in the UK in 2020, down from 56% 10 years prior. In fact, in 2020, 13.7 million consumers didn’t use cash at all. 

Paying by card is convenient. It means you don’t need to visit a cash point or deal with having lots of heavy coins to carry around. It’s also secure, and as people have becoming increasingly confident paying by card, cash has largely lost its appeal. 

But for people who rely on cash or like to keep a supply of cash at home should there be a crisis, the signs that we’re turning cashless will be a source of worry. 

Why are people turning their backs on cash? 

When the Covid-19 pandemic hit, cash quickly fell out of favour. We were all encouraged to use contactless payments as an additional safety precaution, with the limit pushed up from £30 to £45. 

Many shops, cafes and other establishments went one step further in only accepting card payments, forcing people to become more comfortable with tapping rather than rattling through a coin purse. And in October 2021, the contactless limit went up to £100, which made paying on plastic an even more convenient option. 

Having said that, the pandemic cannot be wholly to blame for the rise of card and app payments. In 2019, before Covid-19 arrived in the UK, only about 2.1 million people used cash for their day-to-day spending, and cash was used for less than 30% of purchases.  

So, why are we falling out of love with cash? There are a few reasons. Contactless payments have made paying by card much easier. Mobile payments using a fingerprint as authorisation also mean that if you leave home without your card or cash, you can still make purchases.  

Access to cash is also causing problems. The number of working cash machines has fallen by 17% in just two years. One reason why ATMs and the cash-sorting centres they rely on have declined is that demand has fallen while the costs to run them have remained the same. There are calls for the government to step in to prevent more from shutting down. 

The problem with cash 

Reports say that around £50m in loose change is currently being accumulated in the UK. It is almost impossible for that cash to gain or even maintain its value in real terms, especially given that inflation reached 3.2% in August of this year – its highest since 2012. 

Cash is also unsecure, with no protection if it is stolen. People who prefer to carry cash rather than use a card are putting themselves at risk of losing money – whether to inflation or to criminals. 

Some people also find that paying on plastic is better for money management. Most banks now have apps where you can see every transaction on your personal dashboard meaning you don’t need to scan through and add up all your receipts.

With this data on your outgoings, it is now much easier to budget your monthly spending. A cashless society brings benefits for lots of businesses, too. Managing cash can be time consuming and expensive, whereas card payments allow for straightforward reporting. 

Governments and banks also prefer people to spend on plastic because it leaves a paper trail. This data can be helpful in detecting crime but also to better understand people’s spending habits, which can be used to set policies.   

Side-effects of a cashless society 

On the flipside, spending with card offers no privacy, and not everyone wants each and every payment tracked. Having no cash at all can leave people stranded. Some places still don’t accept card, including lots of car parks. 

And if you rely on an app, you could be left without a way to pay if your phone runs out of battery or if you don’t have any signal. It can also be more difficult to repay friends and family for small purchases. For lower amounts, setting up a bank transfer can seem counterintuitive. 

There are also situations where having physical cash may be more secure. If there’s an economic crisis, for example, cash can become sought after. 

Some people simply rely on cash. The elderly and homeless people are examples of the significant sectors of society that commonly continue to need cash to get by, and they are often vulnerable. Currently, there are no systems in place to protect these people and ensure they can access money.  

Is going cashless inevitable? 

There are lots of signs that the use of cash is shrinking and will continue to do so. One of these is the fact that progress currently favours non-cash payment methods. The likes of contactless payments and payment apps will likely grow in popularity, number and functionality, which will give people and businesses yet more ways to pay.   

The only thing stopping the UK from becoming cashless is policy. In the 2020 Budget, it was announced that plans would be put in place to ensure people who rely on cash can access it and use it. However, it is not yet certain how the new legislation will work. 

What can people with lots of cash do? 

Charities are calling for people with unused and unneeded cash to donate it, which was welcomed by Eric Leenders, managing director of personal finance at UK Finance: "Putting your pennies in a charity box is a great way to help those in need." 

People with lots of cash should also consider whether it is the most effective way to achieve their financial goals.