Go Bankless With a Cash-Only Lifestyle

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Even though most Americans regularly use credit cards, many still operate on a cash-only basis. After recent bank collapses, more Americans have taken their money out of the banking system and are looking to go bankless.

According to the Federal Reserve, in 2020, about 81 percent of Americans were “fully-banked.” It means that they did not have to use services in the form of payday loans, money orders, pawn shops, check cashing services, etc.

More People Are Choosing to Go Bankless

After the collapse of the Silicon Valley Bank, the Washington Post found out that about another 12 percent of Americans took their money out of banks. Another 18 percent said they were thinking about doing so.

Some people prefer to go completely off-grid and going bankless makes it necessary. Other people do not trust banks and are looking to move toward decentralized finance (DeFi)—largely (but not altogether) staying away from banks and credit unions. In order to do so, some people move toward crypto, which can provide new opportunities and better control over your finances.

Reasons You Might Want to Try a Cash-Only Budget

Probably the best reason to adopt a cash-only lifestyle and ditch your bank is that it can help you stay debt-free. Since you will not buy anything above your budget, it can enable you to stay out of debt. Staying out of debt, though, you will need to plan your spending carefully, track it, and you will need to have a considerable emergency fund to cover unexpected costs.

Having a Budget Is Not an Option

Even though you choose to live a cash-only lifestyle, you still need a cash management system to help you stick to your budget. One of the easiest and best ways to do this is to use an envelope system. It can work if you have a little discipline. All you need is several envelopes—one for each expense category.

When you get paid, put the amount of cash you want to spend in each envelope. Then, when there is no more money in that envelope—it’s time to stop spending money in that category until your next paycheck.

Ways to Get Started Going Bankless Using Crypto

Before you decide to go cash only, you should think it through. Because American society is based on the banking system, there may be some difficulties in making the change. You need to check to see what services you currently have that require you to have a bank. If you are retired, the Social Security Administration, etc., requires a bank account so they can deposit your checks.

The first thing you need is a digital wallet (also called a non-custodian wallet). You can choose almost any kind and you will use it to store your cryptocurrency, digital assets, and your decentralized identity (DID). Wallets vary and some work better with one type of crypto than others. Spritz says that a MetaMask and a Coinbase Wallet will work well with Polygon and Ethereum. TrustWallet works well with BNB Chain. CoinCashew can help you select one or more wallets, such as mobile, desktop, hardware, and browser wallets.

There is a learning curve to going bankless with cryptocurrency. You should not jump in and drop your bank accounts immediately because there are things you need to learn as you go along. The bankless idea is still in its infancy and is changing as it grows and gets better.

After you have a wallet and bought some crypto, you need to get a debit card to make purchases and payments. There will be a charge to load your card each time you put money on it.

Things You Need to Know About Going Bankless

• Crypto Is Not Tax-Free

The Internal Revenue Service (IRS) has sent out letters warning people with crypto accounts to report their gains and losses at tax time. The agency counts cryptocurrency as property—and so are stablecoins and non-fungible tokens (NFTs). You should also know that your crypto company is required to send a copy of your 1099 to the IRS. They are cracking down on people who do not report it.

• Crypto Is Highly Volatile

When it comes to the stock market versus crypto, be aware that crypto is the less secure of the two. Your risk is higher when you invest in crypto—and there is a possibility you could lose your entire investment.

Problems With a Bankless and Cash-Only Lifestyle

• Money in Banks Is Insured

Although some large banks have recently collapsed, they were insured by the FDIC, which guaranteed the deposits. People with accounts in those banks quickly had their money available through the new bank. There is no insurance on money you keep at home, which means you could lose it all in a fire, theft, flood, or tornado.

• Credit Cards Also Provide Some Protection

Using credit or debit cards can also give you some protection that you do not have with cash. If someone steals your credit card and makes purchases with it, most companies offer a liability guarantee and will not charge you for it.

• Good Credit Scores Come With Many Valuable Benefits

Taking a cash-only lifestyle does not allow you to build a credit score. If you have no credit history when you do apply for a loan, you will likely receive the highest rates and the shortest amount of time to repay it. If you need money in an emergency, a bank would more likely give it to you if you have a mid-range to excellent credit score.

Credit scores are used in many ways today. Having a good one can help you get a place to rent and will give you better rates on insurance. Companies may determine whether or not to hire you based on your credit score, and it will be used to determine whether or not you should get a mortgage, a car loan, a credit card, and more.

Most financial advisers advise people not to take all their money out of the bank. There are many benefits that a bank can give you—which you lose if you withdraw all your money. Unless you use crypto, you will not gain any interest. Having your paycheck directly deposited in your bank is safer than cashing it at a store. Some companies may require that you sign up for automatic billing, which you cannot do without a bank account.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.