Cash

We imagine that cash holds no secrets for you: you've used it all your life and know, for example, that almost everyone accepts it (though it's tricky to pay in cash online!); and that it's best not to carry too much on you as you might lose it or have it stolen.

The benefits of cash

Cash has the 'power to extinguish a debt': you hand over coins to the café owner for your coffee, and you no longer owe them anything. Payment is immediate: the café owner doesn't have to wait for the money to arrive in their bank account.

Payment cards, cheques, credit transfers, and other payment methods usually involve fees, commissions, and stamp duties; cash does not. There are no direct costs charged to you: the costs of producing and circulating cash are borne by the central banking system, alongside banking and postal costs (only for circulation).

Behavioural research in finance shows that paying in cash - actually seeing banknotes leave your wallet - causes a feeling of pain, which discourages careless spending and encourages us to stick to our budget. Paying with cash feels very different from the simple click you make when authorising an online purchase…

In the event of a blackout, technical problems, or cyberattacks, cash still allows you to pay.

The limits on cash usage

If you wanted to pay in cash, say, for a car instead of a coffee, you'd need to reconsider and use other payment methods. In Italy, the law forbids cash payments of €5,000 or more, under penalty of administrative sanctions both for the payer and the recipient. The same applies to donations and loans to relatives. And if, returning to the café, you wanted to pay for your sandwich with one hundred 5-cent coins? You would find a second limit: no one is obliged to accept more than 50 coins for a single payment.

The risks associated with cash

Cash can be lost or stolen, it can deteriorate or be destroyed. Be careful not to carry too much on you, but also avoid keeping large amounts at home! One way to protect yourself is to deposit money in a bank or at the Post Office.

You might rightly observe that a payment card can also be lost or stolen. However, cards usually have your name on them, and you can block them to prevent unauthorised use. There is no way to prove ownership of cash, nor can you stop someone from using money they have taken from you.

Another risk to consider is counterfeiting, although euro banknotes have various security features that make them genuinely difficult to counterfeit. Knowing these features will help you quickly spot counterfeit notes and avoid accepting them, for example, as change after a purchase.

Finally, banknotes and coins can cease to be legal tender, as happened with the Italian lira or some British pound notes: avoid holding on to them for too long.

One last point to watch out for: when you use cash for purchases, it's harder to keep track of your spending. For this reason, you should keep receipts and note down your expenses as soon as possible to keep your budget up to date.