Are Cashless Transactions Causing a Surge in Debt?

Over the last decade countries have been steadily moving towards a cashless society. Countries like Australia in particular are well advanced when it comes to cashless or tap and go transactions with the public embracing technology and a touchless shopping experience.


Post 2020 and the COVID pandemic, even the most resilient of us who prefer cash payments have made the leap to tap-and-go cashless transactions.


From the morning coffee and filling the petrol tank right through to our groceries, we tap our credit cards with little thought about our budget or impact on our finances. The ease and convenience almost makes it feel like we are getting our goods and services for free!


Due to the environment in which we now need to live and operate, many retailers now insist on a touchless transaction process and ‘no-cash transactions’ signs are becoming common place.


But what are some of the side-effects of a cashless society on personal debt levels and how is it impacting countries like Australia who have embraced it?


According to data from the Organisation for Economic Co-operation and Development (OECD), Australian household debt sits at around 210% of net disposable income. Based on that they rank 5th behind Denmark (257%), Norway (240%), Netherlands (236%) and Switzerland (223%) in this important metric.


This data gets even more interesting when you compare it with countries with spending habits that are similar – the USA for example has household debt as a percentage of net disposable income of 105% and the UK has it sitting at 142%.


There is evidence to say that the easier it is to transact and incur debt, the greater the debt levels we incur. Do you agree? Think about the latest trend in Buy Now Pay Later service providers like Afterpay - it is fantastic to buy items on credit, with few checks. But is it causing us to spend more than we can afford and manage?


These are ofcourse country based statistics and averages, so it is important to step back and take a look how your own debt levels sit in relation to disposable net income and to find a level that you are comfortable at managing. Remember not all debt is bad, so this also needs to be taken into consideration.


If your debt level is higher than your preferred limit or in excess of the rates in the top 5 countries listed earlier, here are a few ideas for getting your debt levels back on track.


  • Pay your full card balance off every month. If you can't afford to do this, then it's an indication you need to revisit your spending habits or at least have a critical look at your budget to ensure this is a short term problem, not a long term one.

  • As mentioned above, you need to create a realistic budget so you can see where you money is going and how much extra you are going to be able to pay off your credit cards in future months - and how long it will take you to pay it off in full. The Australian government’s Moneysmart website has a free budget planner which would be a great place to start.

  • Get into the habit of reconciling your bank transactions for cashless or tap and go transactions each week and compare how much you are spending against the amount you allocated in your budget. One of the keys to financial independence is being accountable to yourself when it comes to your spending. You can plan all that you want, but being strong enough to stick to it is what really matters. A weekly transaction reconciliation is a good habit to help you do this, plus you will easily pick up any suspicious transactions or unnecessary direct debits that may still be coming out of your account.

  • Why not leave your credit card locked up and put your discretionary spending allowance into an account with a debit card, or get a pre-paid debit card for the amount you have allocated. This way you can get the convenience of tap and go cashless transactions without incurring the debt. You can get these from your Bank or even your local Australia Post branch.

  • Review all your subscriptions that are coming out of your Bank account quietly each month. Things like subscriptions to Netflix, Amazon Prime, Stan and Kayo (do you need them all?) as well as any online magazines or SaaS platforms. You can easily forget about them and end up paying them for years despite not using the service anymore. These days you need to check more than your Bank account, you also need to check things like your iTunes account too. Apps and Apple Music for example could be set to automatically renew. A good tip, turn off auto renew on all your subscriptions. You will be prompted when its about to expire, so its like a guaranteed reminder to assess whether you really need it or not when the time to renew comes.

The truth is, it is easier than ever to spend money now. Convenience is everywhere and it is done on purpose to MAKE US spend more. Its good for business. It's not good for our bank balances or personal debt levels. It is critical to stay in control of your finances. If you are really struggling to pay your debts on time and debt collection agencies or your Bank's debt collection department is now calling you, its not too late to fix things.


Settled.app is a digital platform that will give you the tools to successfully negotiate with debt collectors. You will not only be able to get your debts under control, but you will save a lot of money and stress in the process.


We offer a fully digital debt settlement letter generator so you can create letters to send direct to your Bank or creditor to resolve overdue debts before they have a significant impact on your long term finances and quality of life.