Thursday, August 26, 2010

EFTPOS usage – do you spend more money without cash?

Oh boy, here we go again, another blog post because of another interesting conversation. Why does this happen to me?

Someone made the comment they spend less if they use EFTPOS only. I disagree and the banking system disagrees with me also.

Let’s go back to the start of the use of EFTPOS. The banks and government wanted it introduced to reduce the cost of money handling. Yes handing money costs money, the damaged bills need to be sorted and destroyed. Coins need to be counted and damaged ones recycled. Tellers needed to be present in the bank to receive and distribute said money. See the cycle? It all costs money. So the businesses of the world thought that removing cash would remove the cost of the handling.

ATM’s became a common sight in the Streets of Melbourne in the early to mid 1980’s. The Commonwealth Bank Branch at the corner of Bourke and Russell Street installed theirs in 1986. People were quite confused by it, a staff member was rostered on to handle the number of queries raised in relation to it.

We all know how an ATM works, so no need to cover the ins and outs. People were encouraged by banking institutions to get a plastic card and a PIN number and use the machine in preference to using a teller inside the bank. The bank could see the financial benefit in reducing tellers and pushed hard for people to set up new style accounts and move people away from passbook style accounts. They did this using a variety of methods, from reducing passbook account interest rates, to penalizing people for using tellers with a fee per use charge.

Eventually ATM/EFTPOS usage became the norm rather than the abnormal.

The problem with this is that people actually forget how much they are spending on the plastic, be it their money or on credit. They honestly have no idea where the money goes.

The banks now ‘sell’ EFTPOS machine to retailers with recommendations like:-
“Typically customers will spend more with EFTPOS payments than when using cash, giving you the opportunity to maximise sales revenue”
“and your customers will be able to spend more and make more impulse purchases because they're not limited by the cash they're carrying with them.”

Now as a user, you should be made aware of the following:-
•Getting cash out at the same time you’re paying for goods using EFTPOS is a budget-friendly way to transact. The two transactions are only counted as one by your bank, so you pay a single fee instead of two.
•There are no fees for using cash, and you can't get into debt as easily using cash as you can with a credit card... but at the end of the month a credit card will allow you to see (and remember) where you spent your money. Cash does not (on it's own) have this same advantage
•It's easier to track spending using a card, where each purchase is recorded, than it is with cash for this reason.
•It’s easier to impulse buy when you don’t actually handle the cash. With the push a few buttons the money is gone.

Some people are really good with spending (or not spending) money, others……. Well……… they don’t manage as well.

I can be a bit of both, they do say that nothing beats a good shopping binge to brighten ones mood!

As a re-cap we have the banks pushing to retailers the benefits of a ‘cashless’ society where the customer will spend more, because they can’t handle and therefore miss the cash.
We have the banks pushing customers away with fee for use banking, where using a teller, sees some customer penalized.
We have the banks reducing interest rates on passbook accounts, to push people towards electronic banking.
We have banks removing face-to-face service in an attempt to force people onto electronic banking

Some retailers have shied away from using EFTPOS, some because they are wary of the fees, some discourage its usage by charging extra fees for each transaction or setting a minimum transaction costs and the customer sees no perceived benefit with either. Some retailers avoid EFTPOS because they perceive it all to be too hard. The benefits to retailers of using EFTPOS actually outweigh the inconvenience of not having EFTPOS. There is less cash to be counted at the end of the day, fewer trips to the bank, reduces the risk of theft, reduces the risk of burglary or armed hold-up.

As a consumer you need to be aware that you will spend more hard-earned money if you can’t actually pass the money over the counter. The risk of fraud is increasing with the number of compromised ATM’s and EFTPOS terminals. There is nothing more embarrassing than being caught with no cash, and no money in your account.

Personally I love electronic banking, saves me time, I can bank and pay my bills at anytime without concern for when the banks are or are not open. I can control my cash flow by withdrawing a small amount with each EFTPOS transaction and use that cash for smaller transaction, like coffee and similar.

Everyone is different and everyone has different needs. Some people can budget, some cannot. Life would be pretty boring if we were all the same.

Credit Cards are a completely issue and I won’t even touch on them. That one’s WAY too complicated for me, suffice to say yes I do have a credit card and I do use it, but sparingly and with balance paid off each month


  1. Due to overzealousness on my behalf I deleted many comments so please accept my apologies and the duplicates of said comments back to my blog
    Courtesy of Blossy
    I'm with you on this one Heather! There are so many people caught out by using EFTPOS.

    My oldest learnt the hard way losing a substantial amount of his money in fees due to over using EFTPOS facilities. He now knows to use his card once a week in one transaction and withdrawing the cash that he requires for the rest of the week in order to limit his fees.
    I find banks are awfully sneaky when it comes to taking fees from us.

  2. Due to overzealousness on my behalf I deleted many comments so please accept my apologies and the duplicates of said comments back to my blog
    Courtesy of Spagsy
    Yes i feel very special. But I stay true to my theory that I have EFTPOS down to an artform. I literally only buy what i need... I have tried to take cash out but find that cash goes to frivilous things - like coffee and eating at THAT Scottish restaurant. I know how much is in the account and I budget accordingly... there are things i pay for once a month and i have a direct deposit set up to put cash on my CC - which houses health insurance and gym membership - and the only reason i have a CC is for the frequent flier miles.....
    But anyways, thanks for making me feel special and you really should have come to trivia night tonight...