Cashless payments lead many into debt – VnExpress International

Just two weeks after receiving his VND20 million (US$800) salary, Thanh Huyen was shocked to discover that only VND1 million remained in his account.

Surprised at being able to use up most of her salary in just half a month, the 27-year-old office worker felt as if she had been “robbed.” However, the transaction history clearly showed more than 100 purchases of clothing, shoes, food, cosmetics, and flight and accommodation reservations for a trip she had taken. Many of these transactions occurred early in the morning while she was scrolling through social media.

Adopting the habit of carrying a minimum amount of cash for the past three years, Huyen leaned into the growing trend of cashless payments through various e-banking and e-wallet apps as well as QR codes, and conducted all his transactions in your phone. This change has caused his expenses to skyrocket from 10 million VND a month to often exhausting his funds before the end of the month.

“I assumed I wouldn’t spend as much if I didn’t ‘see’ the money in my wallet, but the reality is that I ended up spending more due to the widespread acceptance of card payments and bank transfers,” Huyen said.

Huyen uses a QR code to pay for a clothing purchase in Ho Chi Minh City in early March 2024. Photo courtesy of Huyen

Visa’s 2023 Consumer Payment Attitudes Report revealed that Vietnam leads the cashless charge in the Southeast Asian nations surveyed, including Cambodia, Indonesia, Malaysia, Singapore, Thailand and the Philippines, with an adoption rate of 88%. The country also saw significant growth in new e-wallet registrations.

Vietnamese participants primarily cited security concerns (fear of theft or loss of cash) and the growing acceptance of cashless payments as key drivers of this shift.

Additionally, the report noted that 61% of Vietnamese respondents now carry less cash than before and 62% have adopted QR payments.

Data provided by FiinGroup, a Vietnamese provider of financial and business information services, underlines this trend, showing that at least four in five Vietnamese, mainly young people (born between 1981 and 1996) and high-end buyers, regularly interact with the Internet . wallets, highlighting a rise in the popularity of cashless payments.

This move is accompanied by a notable decline in reliance on cash, as evidenced by a State Bank of Vietnam report on a 2% drop in ATM installations from January 2024, and the ATM congestion that Once common on holidays it has now disappeared.

However, frequent users of cashless payment methods could be experiencing the “cashless effect”, a phenomenon highlighted by Dr. Do Minh Cuong, former professor at the University of Economics and Business at Vietnam National University in Hanoi. . This effect arises from the lack of physical interaction with money, which tends to increase spending habits.

NerdWallet, a personal finance company, also suggests that spending physical cash carries a tangible sense of loss, making you feel more important and therefore limiting spending compared to the more abstract nature of digital transactions. or by card, which lack an immediate physical impact and can lead to greater spending.

In support of this observation, a 2023 study by data provider Dun & Bradstreet found that people who use credit cards tend to spend 12% to 18% more than those who rely on cash transactions.

A customer shows her QR code payment receipt to staff at a coffee shop in Hanoi’s Thanh Xuan district in April 2024. Photo by VnExpress/Quynh Nguyen

Previously, when his salary was paid in cash, Bao Chau, 40, from the northern city of Hai Phong, allocated his earnings between daily expenses and savings. But since his salary started transferring directly to her bank account, online payments became more convenient and she started using them for everything from paying bills to making purchases and even lending money to friends.

This convenience disrupted her and her husband’s goal of saving 50% of their 30 million dong income, leading them to save nothing.

“Before, I would count the cash in my wallet before making a purchasing decision,” Chau said. “The act of parting with the cash was painful.”

“Now, with a quick QR or card scan, I don’t think twice and often only realize I’m out of funds when transactions fail.”

Cuong notes that digital advances have made cashless payments easier and popular, a trend also seen in developed countries where technology improves convenience.

“However, everything has its pros and cons,” Cuong said. “The ease and speed of online payments comes with risks such as overspending and accumulating debt without prudent financial management.”

Huyen’s narrative bears this out, as linking her bank account to numerous e-wallets and uncontrolled shopping habits frequently push her into debt, forcing her to seek financial help from family and friends to get through the month. Her attempts to switch back to cash to better control her spending were short-lived due to a shortage of ATMs and also her fear of losing cash.

“The simplicity of modern trading technology complicates savings efforts,” Huyen admitted.

Chau’s experience also confirms Cuong’s claim, as his inability to fully understand how his credit card works, resulting in late payments and a substantial accumulation of interest, which once amounted to a 20 million fine of VND.

In addition to overspending, Cuong also highlighted the risks of erroneous transactions and fraud in online payments. Wire transfer users can send money to the wrong accounts or in the wrong amounts, according to Cuong. They could also become victims of fraud by clicking on a malicious link, Cuong warned.

Mai Anh, from Hanoi’s Thanh Xuan district, experienced significant losses due to misspelled bank transfers, the largest of which was when she accidentally wrote 20 million instead of 200,000 when making a bank transfer.

Therefore, financial experts suggest the 50-30-20 budgeting rule for effective financial management. Applying this method means allocating 50% of income to essential needs, 30% to flexible spending, and 20% to savings and investments. These sums must be clearly separated and never mixed.

“However, extreme solutions such as using cash only or splitting funds between multiple cards are not recommended,” Cuong said. “The more cards you have, the more you spend, and credit card users can go into debt if they don’t pay on time.”

Understanding how cards work before purchasing one is crucial, he advised, recommending that people embrace technological advances for convenience rather than racking up debt.

Anh, 30, from Ho Chi Minh City, struggled with card-induced debt, but is learning to manage her finances better, with the goal of buying a house before age 35. By allocating 30% of his monthly income for daily needs in a single bank. card and without allowing himself to spend more than that amount, Anh has improved his financial control.

“This method allows me to manage my finances effectively,” Anh explained. “Now I know when to stop spending instead of spending irrationally.”