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Cyber-hackers and new bank policies show that cash is better than digital money

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As the year turned from 2013 to 2014, two major events in the world of digital credit and currency are proving that using cash is still much safer than relying upon digital money. In fact, when you add in new bank policies that went into effect on Jan. 1 regarding your money's status as a depositor, then not only is the use of cash proving to be a more secure form of transacting, but holding cash outside of a banking institution provides less risk of loss, from both cyber-hackers and now, bank officials.

On Jan. 10, Neiman Marcus became the second major retailer to have their customer data stolen by cyber-hackers, and when added to the number of people affected in last months data theft from Target's networks you have more than 110 million consumers potentially at risk of identity theft because their data was tied to debit, credit, and other forms of digital bank cards.

Upscale department store Neiman Marcus confirmed that its database of customer information was hacked last month, independent security researcher Brian Krebs reported on Friday.

The Neiman Marcus hack follows news today from Target that its investigation into its recent hack found that thieves made off with the personal and credit card data of up to 110 million Target customers, 70 million more than previously thought. - CNet

Stolen data from both retailers are intrinsically tied to customers who have signed up for, and used, retail credit cards from either store. Additionally, it is very possible that anyone who used a prime credit card such as Visa, Mastercard, or American express, or a debit card from a bank, could be vulnerable to identity theft as these transactions are also recorded digitally, and account numbers are stored in their archived networks.

The only individuals in both instances who are absolutely safe from cyber-hackers are the ones who used cash to purchase items, or those who used Visa style 'gift cards' that load money onto a digital format and have no network ties to an institution.

Cash will play another very important key role in society in 2014, and that is primarily due to a provision in the Dodd-Frank banking bill that was passed by Congress in 2010. Beginning on Jan. 1, banks are now allowed to consider customer deposits as an unsecured credits, which the institution holds on account as a liability. This means that in the event of a bank failure or crisis, all deposits are considered assets of the bank itself, with customers holding secondary or tertiary claims to what they thought was their money. The result could very well mean that customers would be paid back pennies on the dollar in the case of a bankruptcy or legal solvency hearing, with other creditors such as bond and equity holders receiving first rights of remuneration.

Thus the using of cash to make purchases can be considered moot if that cash is being held by an institution that can control the distribution methods of how you access it, versus having that cash in your hand, wallet, or personal control.

The advent of digital money is a blessing to most, as it allows them the freedom to carry all their financial information on a card, or in a device like a smart phone. But the risks of relying upon a digital system means that cyber-hackers only have to break into one network to be able to steal from millions of customers, even if they are thousands of miles away and residing in a different country. Holding and using cash meanwhile, means a thief has to be physically present, and can only steal money and data from a single person, or small group of individuals. Additionally, if you are robbed in person then the process to recover your money and identity can begin immediately, whereas with a cyber-attack, you may not realize your information and money has been stolen for days, weeks, or even months down the line.

In just three short weeks, monetary and identity information was stolen covertly for over 100 million people, and in less than that amount of time, the banking industry was given the power to confiscate your money as needed to pay for their own distress and insolvencies. Recourse for consumers in both instances are extremely limited since the world now revolves around the use of digital currency and credit, and cyber-hackers can reside in locations around the world. But as people found out in the 1930's during the Depression era banking crisis and holiday, cash, and the holding of cash on your person, is the most secure form of control and access individuals can have for their money.

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