In cash we trust

I feel a sense of power when I say lsquoI donrsquot need thisrsquordquo says Lisha Mansukhani 50 over the phone ldquoThisrdquo could be any consumer item even a bag of her onetime addiction Truffleseasoned potato chips ldquoI was addicted to them and there they were on sale so I thought why not buy a bunch of themhellipand then stopped myselfrdquoThe content writer who lives in Dubai and Worli Mumbai has shunned credit cards and UPI apps for almost a decade Instead she relies on cash and one online wallet linked to an ecommerce platform She loads that wallet with money from her bank account for monthly groceries but has lately realised that she canrsquot use the balance for the monthly subscription optionmdashthe reason she started the wallet in the first placeLisha MansukhanildquoRecently someone needed to send me money electronically and I told them to put it in my walletrdquo she says ldquoNow I find myself spending twice the amount because I canrsquot use the ewallet money for all purchases Sometimes I spend from it impulsively because lsquopada hai na paisahelliprsquordquoRecent researchesmdashby Forbes Advisor and Business Standard independently from each othermdashfound that people tend to spend more when making cashless transactions either by tapping a card debit or credit using presaved card details online or through UPI and ewallets hoisted by the absence of the lsquopsychological pinchrsquo of parting with cashIndia saw 1176 billion UPI transactions in 2023 breaking global records for digital payments Representational picThe Business Standard survey conducted among 2300 Indians found that 844 per cent respondents admitted to spending more with digital payment modes In the Forbes study which had a sample size of 2000 US residents 58 per cent of the participants said card payments are most likely to make them spend moreThis aligns with the findings of a study conducted recently by the University of Melbourne and University of Adelaide in Australia published in the Journal of Retailing That consumers spend more using cashless payment methods compared to cash particularly when it comes to luxury items And this also coincides with the large consumer debt we are shouldering collectivelyRitesh UttamchandaniIn 2024 Indiarsquos household debt reached around 671 billion which includes consumer durables and personal loansmdasha record high of 39 per cent of the countryrsquos GDP as per an analysis by Motilal Oswal The report said that this is mainly driven by faster growth in nonhousing debtIronically this impulsive cashless spending does not extend to charity or tips Lachlan Schomburgk a PhD student at the University of Adelaide who led the Australian study that looked closely at the spending habits of 17 countries found that ldquoAgainst our expectations we found that cashless payments do not necessarily lead to greater tips or donations in comparison to cashrdquoThe ease of cashless transactions can exacerbate overspending while shopping online especially with so many shopping apps across our devices Representational picMansukhani has been creditcard less since 2015 when she was forced to live without one as her card couldnrsquot be delivered while she oscillated between residences in two countries Once she got it she tried to use the lounge access promised at an airport ldquoAnd it was so embarrassing trying again and again to get the OTP while others passed me byrdquo she said ldquoAll the benefits they offer are smoke anywayrdquo After repeated conversations Mansukhani requested for the card to be cancelled and cut it up only to receive a call a few months later informing her of XYZ added benefits at which point she realised they had not cancelled the card at allShe has also seen her friends juggle 20odd credit cards transferring the debt from one to the other for points and other benefits and decided to do withoutSatish Mehta founder Athena Credxpert LLPAdded to the lack of the ldquopsychological pinchrdquo that curbs spending with cash is the ability of our mind to function in silos ldquoWe have various apps on different devicesrdquo says Mansukhani ldquoand when we close one say the phone after a SwiggyZomato order we open the tablet and start again with Amazon or Flipkart and then get on the laptop and respond to an online offer on TshirtshelliprdquoEach is a minor dopamine hit fuelled by a surge in stress from news on social media or an urge to buy this and that in the name of selfcare ldquoI think this selfcare wave or thinking lsquoI deserve thisrsquo has also reached unrealistic levels making us buy small things that add up to a lotrdquoSo Mansukhanirsquos lsquoI donrsquot need thisrsquo mantra becomes stronger ldquoIf itrsquos a big item say a laptoprdquo she adds ldquoand I canrsquot split it across two debit cards I obviously canrsquot afford itrdquo She uses bank transfers and cash where she can as does Roma Chawla 37ldquoIrsquove never used a UPI apprdquo says Chawla a Bandra resident ldquobecause I believe itrsquos risky to have all your personal information stored on your phone I also donrsquot feel comfortable sharing my phone number with anyone so that makes me even more cautious I know there is a scanner for UPI payments but many times I have seen it doesnrsquot workrdquo Because of this the fashion designer and stylist makes no impulsive purchases and has no consumerrsquos guilt In case of an emergency that needs an electronic transfer she calls her sister who does the needfulDoes this habit exclude one from the cashless economy The aim says former banker Satish Mehta founder Athena Credxpert LLP is to be cashless as in use cash less rather than absence of cash transactionsldquoA credit card is the most expensive piece of plasticrdquo says the former managing director of CIBIL ldquoyou pay 40 per cent interest if you default on paying it in full It started out as a convenience for those without adequate cash income for larger purposesrdquoUPI is an extension of this contactless transaction ldquoconveniencerdquo to a debit card and it presupposes you have the cash inlets for the expenditure outlet The use of credit cards and bank loans for large expenses such as cars houses or education builds a credit score which is a quantifiable evaluation of how dependable you are when being lent moneymdash your credit worth in numbersldquoThe credit score of a person ranges between 300 and 900 pointsrdquo says Mehta ldquoand is based on a complex algorithm of secured and unsecured loans open and closed loans past defaulting history if any inquiries about missed payment and whether you have been shopping around and been refused loans Using your credit card judiciously helps build your credit score and credit history which in turn stands you well in future when you need a loan Using your credit card judiciously helps build your credit score and credit history which in turn stands you well in future when you need a loanrdquo Down to the dictum lsquopast behaviour is the best indicator of future behaviourrsquo your credit score decides how reliable you are for large loansSo if yoursquove never needed to go to a bank for help with medical bills education or to buy a house it does underscore the privilege of having a few lakhs and crores in cash to do soOr you could be extremely judicious like photographer Ritesh Uttamchandani 42 who is ldquolike most good companies not listed on the stock marketmdashnot in debt and never has beenrdquoHis prudence stems from a combination of past experiences such as when cops came knocking on his hostel room door because a roommate had been making extravagant and shady transactions using his parentsrsquo credit cards Then as an intern he was tasked with making excusesmdashon behalf of a defaulting seniormdashto creditors who called on the office landline ldquoI hated itrdquo says the Goregaon residentAs an independent professional he likes to know and literally feel the scale of his expenditure ldquoI could swipe a card for a R900 pizzardquo he says ldquoor handle two R500 notes Knowing the scale of my spending helps me control itrdquoHe also dislikes the ldquoleaking of small amountsrdquo as service convenience or bank charges that come with every transaction online and the harvesting of data even if you buy a pack of chips ldquoI recently tried to pay with a R100note for a packet of kurmura that cost R25rdquo he says ldquoThey said they didnrsquot have changemdashacross 10 countersmdashand requested I do a UPI transaction instead so that they get my numberrdquoUttamchandani does use the BHIM UPI app which comes with a cap on daily expenditure Payment frauds on UPI jumped from 195 lakh cases in 2021 to 725 lakh in 2023 with losses increasing from R11 billion to R575 billion the Business Standard study foundBesides all this cautious behaviour is the understanding of how easily cash moves in an economy that relies on daily income ldquoWhen I pay the corner vadapav guy in cashrdquo says Uttamchandani ldquohe tells me he can clear the debt with the pavwallah immediately Itrsquos the same among friends We have to split bills and someone is not carrying cash and now a friend becomes a debtor and there is followup and all that Why Just have R500 in your pocket when you step outhelliprdquo671 BNIndiarsquos household debt in 2024 as per Motilal Oswal8437Of Indians say they spend more with digital payment modesSource Business Standard survey