If you think back to your last three purchases, I bet at least one was made through contactless payment. With the increasing ease of contactless payments, it can be hard to keep track of every little tap. According to Worldpay, the use of contactless payments increased by 30% between June 2017 and June 2018, and shows no signs of slowing down.
Despite the £30 limit, the constant use of contactless cards for small purchases here and there, whether it be a sandwich at lunch or a pint after work, can really add up. A recent survey found that three out of five of us overspend at the tills as a result of contactless technology. Another poll discovered that 59% of people said that they tend to spend more as they don’t have to hand over physical cash, and 72% said contactless payments resulted in more impulse purchases. The nature of the spending means that consumers don’t have time to stop and think about the necessity of the product they are buying as they are already out the door.
This frivolous spending often goes unnoticed with the use of paperless statements increasing. Unless you spend the time combing through your online banking statements, you may often feel like you have no clue where your money is going.
Contactless payments can also be made offline meaning that they can be batched and processed without the retailer contacting your bank first. This can result in a few days’ delay between buying the product and the amount being deducted from your account, potentially causing you to overdraw and with fees from the bank.
If you want to cut down on your mindless spending or even just find out where your money is going, here are some helpful tips.
Try spending only in cash for a month, or even for a week, if a month feels like too much of a challenge. Many people find that seeing their shrinking pile of cash acts as an incentive to cut back their spending and stick to a budget as their money begins to run out. However, don’t fall into the trap of once you’ve broken into a note, then spending the remainder of the change. I often find myself spending the odd few pounds I have on a quick bite to eat or a drink as I forget about the money and only think about my remaining bank balance. If spending only cash is not viable for you, then even just stopping to put in your pin code can allow you the same opportunity as when spending with cash to stop and think about the necessity of your purchase.
Make a conscious effort to sit and go through your online banking statements once a week or at least once a month. Check for any incorrect transactions, whether they are for the wrong amount or shouldn’t be there at all. You may be able to spot trends of where you are consistently spending money – it could be the daily coffee or the Uber rides, which, although small, can really impact on your financial goals.
Finally, take full advantage of the new availability of app-based banks, such as Monzo and Starling. Whilst these apps use a contactless payments system such as Apple Pay or their contactless cards, they send you a notification every time you spend money, so that you are reminded of your spending habits. They also allow you to set budgets within the app, allowing you to minimise your spending within certain categories. In addition, there is the option to round up the cost of your purchases and put the excess into a savings pot, allowing you to save money whilst spending.
To conclude, contactless payments sometimes mean we forget to think about whether a purchase is absolutely necessary, which can mean we end up spending more money than we would like. The lack of friction such as typing in a PIN number or handing over cash, removes the psychological barriers that may get us to think more about our decision. However, if you follow the tips mentioned in this article, you should be able to control your spending even in the world of contactless payments.