Never have Hungarians stored so much money at home, and the banks are not liking it. To have cash does not only have economic and social costs, but clients feel it on the weight of their wallets as well when they keep their savings in cash. The causes and possible solutions have been revealed by a recent study – one of which is none other than terminating cash in big sums. And what will come of it? It all depends on the decision-makers.
The number of cash payments is astonishingly high in Hungary – to be exact, it is at an all-time high. Cash use has increased by 18.7 per cent in the past year and has reached six thousand billion forints, about €17,947,422,324, reported Penzcentrum. This is shockingly high. So bad, in fact, that we are in sixth place in the European Union, as cash substance in proportion to GDP is 14.9 per cent. The banking association lists the following as causes:
- low prevailing money market rates,
- transaction fees that have made non-cash payments more expensive (mainly transfers),
- free cash withdrawals two times a month up to 150,000 forints (€449)
- a high rate of black and grey economy,
- not many options for electronic payments,
- rate of pension, pension-like services, and support being paid in cash.
According to the study, Hungarians like cash because it makes immediate, anonymous payments possible. Many get their income and pension in this form, and like that, it has a physical form – this is a unique Hungarian attitude. Of course, the disadvantages are known as well: cash comes with incredibly high social costs. The study states that costs related to cash give the GPD a 0.4 per cent kick, and the shadow economy takes 1.3 per cent away from the economy – these together are costs that exceed a thousand billion forints (€2,992,609,612), which we pay indirectly. According to experts, keeping cash cost around 200-400 billion forints (€598,531,590-1,197,063,181) in 2018.
But Penzcentrum adds what the study left out: cash is not that safe. Although Hungarian bank fees are high and thus keeping cash may be cheaper than having a bank card, in terms of comfort and safety, it is easily damaged, can be lost, stolen, and after having been stolen, it is easily spent immediately.
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The banking association also states that electronic and innovative paying systems are mainly preferred by people from big cities. The spreading of bank mobile apps also helps increase the use of electronic payment channels. It is important that since January this year, transaction fees do not apply to transfers under 20,000 forints (€60), and next March, the immediate payment system is coming (if it is coming at all). The association has some more suggestions, such as:
- introducing a limit for cash payments over 500,000 forints (€1,496), between any two participants of the economy,
- ensuring an electronic payment possibility would be obligatory when it comes to online cash registers,
- ensuring an electronic payment possibility when the seller’s income exceeds a certain limit,
- cancelling transaction fees, encouraging the spreading of banking package pricing,
- cancelling the two free monthly cash withdrawals, or drawing the limit at 50,000 forints (€150),
- preferring electronic payments to cash when paying checks and bills,
- leading the cash flow toward electronic methods between state, municipalities, and individuals,
- supporting the amnesty which supports putting savings in cash from the black and grey economy into account money.
There are positive aspects to it as well, of course. The spreading of electronic channels is spectacular. The number of electronic transactions has risen by 72 per cent between 2012 and 2017. Card payments increased by 150 per cent, transfers by 17 per cent, and debit charges by 13 per cent. Paypass is clearly dominating the card-payment field. The number of debit cards out there grew by 4.7 per cent from 2017 to 2018, while the number of credit cards has decreased.