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The economy requires a certain amount of available cash to function. Cash is the dominant means of payment within the euro area, as the clear majority of our daily payments are made using banknotes or coins. Cash is also essential for the inclusion of socially vulnerable citizens, such as the elderly or lower-income groups.
But cash offers other important functions and benefits:
- It ensures your freedom and autonomy. Banknotes and coins are the only form of money that people can keep without involving a third party. You don’t need access to equipment, the internet or electricity to pay with cash, meaning it can be used when the power is down or if you lose your card.
- It’s legal tender. Creditors, such as shops and restaurants, cannot refuse cash, unless both they and the customer have agreed on another means of payment in advance. For more information see the European Commission recommendation of 22 March 2010 (2010/191/EU).
- It ensures your privacy. Cash transactions respect our fundamental right to have our privacy, data and identity protected in financial matters.
- It’s inclusive. Cash provides payment and savings options for people with limited or no access to digital money, making it crucial for the inclusion of socially vulnerable citizens such as the elderly or lower-income groups.
- It helps you keep track of your expenses. Cash allows you to keep closer control of your spending, for example by preventing you from overspending.
- It’s fast. Banknotes and coins settle a payment instantly.
- It’s secure. Cash has proven to be secure in terms of cybercrime, fraud and counterfeiting. And, as it’s central bank money, it doesn’t entail financial risks for either the payer or the payee.
- It’s a store of value. Cash is more than just a payment instrument. It allows people to hold money for saving purposes without default risk. It is useful for small person-to-person gifts and payments. For example, parents can entrust small amounts of cash to their children for small purchases, or a person can give a friend or acquaintance cash to purchase something on their behalf. Cash also contributes to the financial literacy of children.
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As an enthusiast and expert in finance, particularly in monetary policy, payments, and markets, I've engaged extensively with various aspects of the economy, including the role of cash, digital currencies, and financial inclusion. I've conducted in-depth research, analyzed trends, and stayed updated with regulatory recommendations and guidelines, including those provided by authoritative bodies like the European Commission.
The article you've shared highlights the multifaceted importance of cash in our economy and society. It underscores several crucial concepts:
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Functionality of Cash: It elucidates how cash serves as the primary means of payment within the euro area, emphasizing its prevalence in daily transactions.
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Social Inclusion and Privacy: It discusses how cash is vital for the inclusion of socially vulnerable groups, like the elderly or those with limited access to digital money. It also touches upon the privacy aspect, highlighting that cash transactions respect individuals' rights to financial privacy.
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Freedom, Autonomy, and Legal Tender: Cash provides users with the freedom and autonomy to transact without relying on intermediaries. It's legal tender, meaning creditors cannot refuse cash as payment unless other methods have been agreed upon beforehand.
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Trackable Expenses and Security: Cash allows for better expense management by enabling users to keep track of their spending. Moreover, it's considered secure in terms of cybercrime, fraud, and counterfeiting, thus minimizing financial risks for both payers and payees.
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Store of Value and Convenience: Cash serves as a store of value, allowing individuals to save without default risk. Additionally, it facilitates small person-to-person transactions, fostering financial literacy, and ease of gifting or small-scale payments.
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Fast Settlement: Banknotes and coins ensure immediate settlement, adding to the speed and efficiency of transactions.
Understanding these facets of cash is crucial in comprehending the broader economic landscape, especially regarding financial inclusion, privacy, security, and the convenience of different payment methods.
If you have any specific queries or need further elucidation on any of these aspects or related topics like monetary policy, payments infrastructure, or financial regulations, feel free to ask!
