Warren Buffett once said:

“Cash… is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.”

Digital and mobile payments are becoming increasingly popular. So, the disadvantages of physical cash appear more obvious and the advantages of it less obvious.

This makes it more important to maintain a clear perspective. In this article, we take a deeper look at both the pros and cons of cash payments.

What is a cash payment?

Cash payments refers to transactions made using physical cash, which today means coins and paper notes.

Up until the late 20th century, cash payment had been predominant throughout the world for centuries. Its long history includes the use of ingots (oblong metal objects), iron rings, cowrie (sea snails) shells, whale teeth, stones, and more.

Cash payments require cash management

As a physical payment method, cash has always required physical processes. These are collectively called cash management (not to be confused with cashflow management), which includes:

  • Authenticating
  • Counting
  • Storing
  • Transporting

And more.

All of these areas need to be done securely and efficiently in order to aid business. On the surface, this seems simple. After all, once accepted, cash can simply be stored in a safe or a vault.

However, when cash operations scale up (in retail stores, for example), managing cash well becomes both more important and more difficult.

Advantages of cash payments

1. Widely accepted

Cash is widely accepted. Nearly every business or individual is equipped to handle cash transactions.

After all, on a small scale at least, it ultimately requires no or low special infrastructure or equipment. On a larger scale, the infrastructure and equipment for cash transactions are well-known.

After all, many people have heard of cash registers, safes, cash in transit (CIT) vehicles, etc.

2. Immediate settlement

Cash transactions provide immediate settlement.

Once payments are made, there is typically no need for additional processing time or waiting for funds to clear. Physical cash is then immediately available for reuse with the next customer or investing the cash advance in new stock, etc.

This is unlike electronic credit card payments, which can take several working days – and payment processing partners – to be settled.

3. Privacy

Paying in cash offers a higher level of privacy than electronic transactions.

This provides a level of anonymity for the buyer and seller, which is valuable in an era where data security and privacy are increasing concerns.

Some consumers feel that third parties’ abilities to track spending habits, income levels, etc., can lead to intrusive tracking and advertising practices.

4. No transaction fees

Some electronic payment methods, such as using credit cards and debit cards, usually incur transaction fees. But cash transactions typically do not.

This makes them more cost-effective for both the buyers and sellers involved in transactions.

5. No dependency on technology

Accepting cash does not rely as heavily on technology, such as credit card machines or internet connections. This can help in situations where technology to accept payment is unavailable or impractical to set up.

However, smart hardware and precision software is critical when it comes to handling physical cash, once payment has been accepted.

6. Budgeting control

Paying with cash can help individuals manage their budgets and spend more effectively.

When using cash, people are limited to only spending only the amount of money they physically have on hand. This reduces the risk of overspending.

Research by the University of Notre Dame even found that cash use is linked to specific psychological states. One research said:

“I think a lot of consumers — particularly those who diligently track their card expenses — recognize that they use cash so they don’t have to think about certain purchases again. In fact, this strategy of using cash to hide purchases from ourselves if we feel bad about them is something my co-authors and I admitted to doing ourselves.”

7. Avoidance of fraud risks

Cash transactions generally carry lower risks of fraud than digital credit and debit card payments. There is no risk of hacking or identity theft associated with physical cash.

8. Prevention of overdrafts

Cash transactions eliminate the risk of overdrawing from a bank account. This is a concern with interest charges that can be associated with some electronic payment methods.

The simpler tracking physical cash enables also means people are less likely to unknowingly find themselves overdrawn.

9. Financial inclusion

Cash can promote financial inclusion, especially in areas with limited infrastructure. It can be essential for individuals who do not have access to banking services or electronic payment methods.

10. Usefulness in emergency situations

In some times of emergency, electronic systems can be disrupted. Cash can then become a vital means of obtaining essential goods and services.

Disadvantages of cash payments

1. Security risks

Carrying or storing large amounts of cash can sometimes be risky. It tends to attract thieves and robbers. Carrying it also increases the chance of cash simply being lost.

2. Lack of traceability and records

The absence of an electronic trail makes it difficult to monitor and track spending patterns in the medium to long run.

This lack of traceability can be a disadvantage for those who rely on detailed financial records for budgeting, tax purposes, credit history or expense tracking.

Manual record-keeping can be cumbersome and may lead to errors or oversights, especially when compared to the automated record-keeping provided by electronic payment systems.

Smart safes can help businesses monitor and record cash movements, as well as the integration of technology into essential cash management processes.

3. Inconvenience for large transactions

For significant transactions, such as purchasing high-value items or making large payments, handling cash becomes impractical.

The physical bulk and weight of large amounts of cash can be inconvenient. It can require accurate and quick money counting efforts and perhaps even the use of cash recycling machines.

4. Risk of counterfeiting

Counterfeit cash has a long history. It has persisted wherever cash has existed, despite punishments – in medieval England, it even carried the punishment of hanging, drawing, and quartering…

And it still persists today. Just over a decade ago, Frank Bourassa counterfeited $250 million in US dollars before he was arrested in Canada.

To reduce losses from counterfeiting, businesses can use counterfeit detection technology to verify banknotes, checks, ID cards, and passports.

5. Cash not always accepted

Today, some vendors, especially in urban or technologically advanced areas, may prefer or exclusively accept electronic payments.

However, in the UK, for example, new powers have been granted to the FCA by the Financial Services and Markets Act 2023. It means designated banks and building societies will need to assess gaps in access to cash.

6. Less convenient for remote transactions

Physical cash is not always suitable for remote or long-distance transactions.

This limitation is particularly inconvenient in scenarios such as online shopping, bill payments, or any transactions with parties located far away.

7. International transactions

Physical cash is an even less efficient and cost-effective option for international transactions.

Its disadvantages include the inconvenience of carrying large sums within and across borders. This becomes particularly important when the conversion leads to different volumes of physical cash.

8. No earned rewards

Unlike certain other payment methods, cash does not often have secondary benefits.

This is unlike credit cards (which offer cash back), reward points (which build credit), for example.

PayComplete’s cash management solutions

At PayComplete we offer a range of cash management-related technologies.

These include hardware and software solutions that can increase the efficiency and accuracy of businesses cash handling processes.


Cash payment remains one of the most popular payment methods in Europe. It offers advantages such as universal acceptance, immediate settlement, and no transaction fees.

However, it comes with notable disadvantages. These include security risks, the lack of traceability, inconvenience for large transactions, and limitations for international transactions.

As cash management technology continues to advance, the drawbacks associated with physical cash become less pronounced. New hardware and software solutions can reduce the risk of theft and challenges in tracking expenses.

Changes to regulation and the consumer-conscious use of cash for budgeting purposes is also prompting individuals and businesses to carefully weigh the pros and cons when choosing their preferred payment methods.

The Advantages and Disadvantages of Cash Payment