A BBC expert has issued a fresh warning to anyone making cash payments and explained the risks. Appearing on BBC Morning Live, consumer champion Holly Hamilton explained that people need to exercise extra caution – due to the absence of a paper trail of evidence.

Cash usage is reportedly declining, with some shops refusing to accept notes and coins and transitioning exclusively to electronic payments. Approximately 14% of small businesses surveyed by ATM network Link have ceased accepting cash in the past year.

This has sparked concerns that certain vulnerable groups could be marginalised, as well as issues around technical failures having a larger impact and households struggling to budget effectively. One strategy for avoiding debt involves withdrawing money in cash and only spending that amount.

Last year, MPs on the influential Treasury Committee warned about a lack of data on cash acceptance and stated that the government should be prepared to compel shops and services to accept cash in order to safeguard vulnerable individuals.

Ms Hamilton stated that individuals paying cash for services, such as those provided by tradespeople, must exercise additional caution or risk facing significant difficulties. Ms Hamilton said: “You do have to ask the question, if someone is coming into your home and insisting on you paying in cash, that to me is a little bit of a red flag here. And let’s address the elephant in the room, okay? Why are they doing that? A lot of people will be wanting to cut corners when it comes to paying their tax. Not everybody clearly, but there will be some who will have it at the back of their mind.”

“It is not your responsibility if you are hiring someone that doesn’t pay their taxes. Not essentially your problem. But when it comes to the aftermath, if you have a service, you know, somebody’s doing something in your home and you’re not happy with it and you would like to get your money back, it is very, very difficult to get that back if you have paid in cash.” She stated that for smaller projects it’s helpful for the tradesperson to receive cash in hand to purchase materials and be able to pay staff.

She added: “I know again that a lot of people will be watching this and they feel very defensive almost about the ability to pay in cash because they feel more comfortable with it. And I understand that because if you’re not say all that tech savvy actually paying digitally, whether that’s, you know, online, bank transfer, on your card, whatever that may be, people feel like they can’t trust it. They feel less secure about it.

“When actually, here’s the thing. You are protected by law for anything that you purchase that if anything goes wrong that you get that money back. But the problem then is when you cash. Those protections that exist for a very good reason are much harder to enforce.”

How to pay

Ms Hamilton explained on credit cards people have protection from section y75 of the consumer goods act. She said: “How many times on this program do we talk about rogue traders? You know, when things go wrong, you get somebody in your home to do a fixer upper and you’re not happy with the results and then you go to Citizens Advice. Do you know what Citizens Advice have found? They got over 700 complaints per week last year about people who have had problems with people coming into their homes, so-called rogue traders.

“So, essentially, you’d want all the protection that you can get in those situations.” She clarified that legally, the Consumer Rights Act remains applicable regardless of how an individual pays. “If you’re pay by card, by cash, whatever it is. If a trades person comes in and does not do what they’re supposed to do with reasonable care and skill, you’re entitled to a refund, whether that is cash or card.

“But look, I have dealt with a lot of people in this situation over the years who have fallen victim to rogue traders. And the first thing that I will ask them is, how did you pay? And my heart sinks when they say they paid in cash. Because you know, even when they go down the long road and end up in the small claims court, there are lots of things that these people can do to try to avoid giving you that money back.

“They can hide their assets. They can declare bankruptcy. I’ve seen it all. Whereas with section 75, it means you can get the money back directly from your credit card provider and charge back. You’re able to get that bank from their back from their bank account. But when it comes to those cash transactions, I’m very sorry to say I mean you’ll be very lucky to see that cash again.”

Two ways to protect yourself

She stated that if someone still wishes to pay by cash they must do two things to safeguard themselves. She said: “First of all, an invoice and that’s exact just outline exactly what you’re paying for and then a receipt to prove how much you’ve paid for that item in the first place.” On each invoice, individuals should ensure there is a 10-digit tax reference number. She clarified that anyone who owns a limited company or completes a self-assessment will have one of these, adding “Red flag again if they do not. You’ve got things like all the details, your company name, address, contact information, the company name and address of the customer that you’re invoicing. Just a clear couple of words there of a description of exactly what you’re charging for, the date the goods or service were provided, the date of the invoice. There might be a VAT amount on there. That’s not always applicable. And then the total amount there as well that’s owed.”

She advised people to also obtain a receipt: “Always ask for a receipt, particularly for big purchases. Um, it is absolutely in your interest to do so. And again, on a receipt, make sure you’ve got as much information on there as possible. Things like the date, the amount, what it is that you’ve paid for, that sort of thing. Because honestly, when it comes to trying to get this money back, the receipt could be absolutely crucial.”