Singapore’s cash or card dilemma

[SINGAPORE] As Singapore rapidly transitions toward a cashless society, the debate between using cash and credit cards remains relevant for consumers. While digital payments and credit cards offer unparalleled convenience and rewards, cash still holds its ground for mindful spending and inclusivity. Understanding the pros and cons of each payment method is crucial as Singaporeans navigate an evolving financial landscape.

Singapore’s Payment Landscape: A Snapshot

Singapore is at the forefront of digital payment adoption in Southeast Asia, with cash usage at point-of-sale (POS) projected to fall from 15% in 2023 to just 7% by 2027. Credit and debit cards are currently the most widely used payment methods, but digital wallets are expected to overtake them in the coming years. Despite this trend, a significant portion of the population—about 34%—still prefers using cash for purchases.

Benefits of Using Credit Cards

1. Convenience and Speed

Credit cards offer instant access to funds and streamline transactions, making them the preferred choice for everything from daily groceries to online shopping and travel bookings. Contactless payments, in particular, have become ubiquitous, with 97% of Singapore consumers using card payments and 82% using contactless cards.

2. Rewards and Perks

Credit cards in Singapore provide attractive rewards programs, cashback, air miles, and exclusive privileges such as dining discounts, concierge services, and travel insurance. These incentives can translate into significant savings and lifestyle benefits for cardholders.

3. Security and Fraud Protection

Modern credit cards come with advanced security features, including encryption, two-factor authentication, and fraud monitoring. Many cards also offer purchase protection and extended warranties, providing peace of mind for both online and offline transactions.

4. Financial Flexibility and Management

Credit cards allow users to bridge short-term cash flow gaps and manage larger purchases by paying in installments. Digital banking apps enable real-time tracking of expenses and setting of spending limits, supporting better budgeting and financial planning.

Drawbacks of Using Credit Cards

1. Risk of Overspending and Debt

The ease of credit card use can lead to impulse purchases and overspending, as consumers may not feel the “pain” of parting with physical cash. High interest rates—typically 25% to 28% per annum—mean that unpaid balances can quickly snowball into significant debt.

2. Fees and Charges

Credit cards often come with annual fees, late payment penalties, and high foreign exchange rates for overseas transactions. While some fees can be waived, they add to the overall cost of credit card ownership if not managed carefully.

3. Fraud and Security Concerns

Despite robust security measures, credit card fraud remains a growing concern in Singapore, with thousands of cases reported annually. Online shopping and contactless payments, while convenient, can expose users to phishing scams and card information theft if proper precautions are not taken.

4. Exclusion of Certain Groups

Some segments of the population, such as the elderly and underbanked, may find it challenging to adapt to credit cards and digital payments, risking exclusion from mainstream financial activities.

Benefits of Using Cash

1. Encourages Mindful Spending

Physical cash imposes a natural spending limit, making consumers more conscious of their purchases and helping them stick to budgets. The tangible act of handing over money can curb overspending and reduce the likelihood of accruing debt.

2. Universal Acceptance in Some Settings

While credit cards are widely accepted, certain small businesses, hawker centres, and street vendors in Singapore still prefer or only accept cash. Cash remains essential for specific transactions and among older generations less comfortable with digital payments

3. Privacy and Anonymity

Cash transactions offer greater privacy, as they are not electronically tracked or recorded, protecting individual financial data from potential misuse.

Drawbacks of Using Cash

1. Security Risks

Carrying large amounts of cash poses risks of theft, loss, or counterfeiting. Unlike credit cards, lost cash is typically unrecoverable.

2. Lack of Traceability and Financial Management

Cash transactions do not provide an electronic trail, making it harder to monitor spending, budget effectively, or maintain records for tax and accounting purposes.

3. Inconvenience for Large or Remote Transactions

Handling cash for high-value purchases or remote transactions is impractical. Cash cannot be used for online shopping or international payments without conversion and physical transfer.

4. No Rewards or Secondary Benefits

Unlike credit cards, cash payments do not offer rewards, cashback, or other perks, potentially resulting in missed savings opportunities.

The Shift Toward Cashless: Who Benefits, Who Risks Being Left Behind?

Singapore’s government and financial institutions have actively promoted cashless payments through initiatives like PayNow and FAST, resulting in a robust infrastructure that supports digital transactions. Younger generations, in particular, have embraced digital wallets and credit cards, while seniors and the underbanked may face barriers to adoption.

Despite the rapid decline in cash usage, a balanced approach remains essential. For many, a hybrid payment strategy—using credit cards for convenience and rewards, and cash for budgeting and privacy—offers the best of both worlds.

The choice between cash and credit cards in Singapore depends on personal preferences, spending habits, and financial circumstances. Credit cards deliver unmatched convenience, security, and rewards, but require discipline to avoid debt and overspending. Cash, while less convenient and increasingly less accepted, fosters mindful spending and inclusivity.

As Singapore moves closer to becoming a cashless society, consumers are encouraged to stay informed, use payment methods responsibly, and leverage the strengths of both cash and credit cards to achieve their financial goals.