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Cash-based payment options: What's right for you?

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You may want to pay for purchases with cash for various reasons. Those reasons include lack of a bank account, unfamiliarity with the banking system, mistrust of the system or general convenience. If you do choose to pay with cash, you should know how to do so safely. Here’s a rundown of all the cash-based payment options available to you.

Cashier's checks and money orders

If you have an account with a bank or credit union, you can get a cashier's check for a small fee. A cashier’s check is written by a financial institution using its own funds. When you request a cashier's check from your bank, money is moved out of your account and into the bank's account. 

Money orders, on the other hand, can be purchased at a variety of locations including banks, credit unions, post offices, and some retail businesses such as gas stations and drug stores. You must use cash to get a money order.

When buying a money order you should fill in the date and name of the intended recipient. Sign the order immediately so no one else can cash it in case of loss or theft. Keep a copy of a money order as proof of payment and, if your money order is lost or stolen, you can go back to the place of purchase and get a new money order.

Money orders for U.S. transactions are issued for up to $1,000. International money orders are limited to $700 for most countries, and $500 for El Salvador and Guyana. The cost of a money order sent to destinations within the United States varies according to the amount and where you order one. For example, U.S. Postal Service fees are currently $1.25 for money orders up to $500 and $1.65 for money orders from $500.01 to $1,000. Bank fees are usually higher than other sources.

Payroll cards

Payroll cards are like stored-value products, such as pre-paid phone cards and bank debit cards. Since 2001, there has been steady growth in use of payroll cards, rather than payroll checks, to pay wages. Benefits to employers include lower costs for printing, processing and handling of payroll checks. Benefits to workers, particularly those without a bank account, include:

  • Reduction or elimination of check-cashing fees.
  • 24-hour access to funds through ATMs.
  • Less need to carry a lot of cash.
  • No need to withdraw all the money at one time.
  • Easier money transfers within a family.

Some employers offer a choice of payment by payroll card, traditional check, or direct deposit. If you have a choice, here are some questions to consider:

  • Is the payroll card issuer reliable, such as an established bank? If not, decline this payment option.
  • Does the issuer offer protection if the card is lost or stolen? If not, decline this option.
  • Are there fees for using the card? If you can’t afford them, decline this option.
  • Can the card be overdrawn, and if so, will you be penalized for doing so? If so, consider declining this option.

Prepaid cards

Prepaid cards, also called stored-value and prepaid debit cards, are “pre-loaded” with money you pay to the issuer at the time of sale. You can buy prepaid cards online and at many retailers, as well as some banks. Prepaid cards offer many benefits for consumers, including:

  • An easy way to pay for goods and services without carrying cash.
  • No need to have a good credit history or open a bank account to get prepaid cards.
  • Built-in spending control because you can only spend what’s loaded on the card.
  • In some cases, access to cash from ATMs.

A prepaid card looks like any ordinary credit or debit card, with a card number, signature strip and company branding. But, prepaid cards do not provide a line of credit like credit cards. What's more, they are not linked to a checking account like a bank account debit card. Besides:

  • A prepaid card doesn’t earn interest or help you build a credit history, as use of a credit card does.
  • Fees associated with buying the card, making utility payments, getting cash from an ATM, and loading money might be prohibitive. Also check whether monthly fees or dormancy fees apply even when you don't use the card.
  • Prepaid debit cards issued by a bank may offer some Federal Deposit Insurance Corporation (FDIC) protection. Other types of prepaid cards do not offer FDIC protection.

Protect yourself with proof of payment

When you buy products or pay bills with cash, it’s important to get proof of payment. For most purchases, a sales receipt serves as proof of payment for a specific service or product. Keep your sales receipts and use them for documentation if you need to return products.

If you pay a bill in cash, ask the party receiving payment to record it in their records and give you a sales receipt. The receipt should show your name, a short description of the product or service purchased, the transaction date, and the amount paid. The receipt also should include the signature of the clerk or other person receiving payment. If this is a recurring bill, you should keep the sales receipt until you receive the next billing statement showing the previous bill was paid.

You should never send cash through the mail to pay a bill. Cash can be lost, stolen or destroyed before reaching the recipient. Instead, use alternatives like money orders or cashier’s checks to pay by mail or to make large purchases in person. Note that the Internal Revenue Service keeps track of transactions of $10,000 or more. This helps stop money laundering and other financial crimes.

Research says

People pay with cash or use cash alternatives for several reasons, including:

  • Banking fees and deposit requirements are too costly for those with limited resources.
  • Migrant workers and others without stable housing find it hard to open a bank account.
  • Workers living paycheck to paycheck don't see any value in opening a bank account.

Research also shows that people are more likely to pay with cash for transactions under $20. In addition, Latinos and African Americans prefer using cash more than other demographic groups in the United States.

Whatever your reasons for paying with cash, your long-term goal should be to open a checking and savings account with a reputable bank. This way, you can better protect your money and build your credit.


Antonio Alba Meraz, Extension educator in family resiliency

Sharon Powell, Extension educator in family resiliency

Reviewed in 2020

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