What Is Digital Cash?

Malcolm Tatum
Malcolm Tatum

Also known as electronic cash, ecash, and digital money, "digital cash" is a term that refers to any system that relies on the use of crediting accounts with small amounts of cash and allowing those credits to be used to make purchases online. The amount of the deposits of digital cash can be in very small increments, even a fraction of the lowest type of coinage used within a monetary system. Purchasing products with electronic money may involve disbursements of any size.

Debit cards are often used to access digital cash.
Debit cards are often used to access digital cash.

One of the differences that sets digital cash apart from other types of cash transactions is that the identity of the buyer does not have to be revealed. The actual transaction is managed with the use of a number normally known as a digital certificate. This number provides verification that the digital cash is negotiable and can be accepted as the payment option for the services purchased. This is different from using a credit card to buy something online, a transaction in which the buyer must provide basic information related to the credit card account before the vendor can process the payment.

The concept of digital cash is sometimes used with online businesses, allowing the business owner to issue cash credits to individuals who perform certain online functions for the owner. With this arrangement, the individual allows the credits to accumulate and can then use them to purchase services from the site owner. A slight variation of this approach allows the user to reach a cash out amount and then request that the digital cash be converted and transferred to another account, where it can be withdrawn and used in the same manner as standard currency.

A broader application of digital cash includes any type of electronic transfer of currency. This would mean that when an employee is paid by an employer using an electronic funds transfer (EFT) the transfer involves electronic money that has the same status as any type of currency. This is true whether the money is transferred into some sort of electronic account that is accessed with a debit card, or a standard bank account that can be accessed with cash withdrawals, writing of checks, or use of debit cards. Online services that allow consumers to pay for purchases by initiating a debit on a related bank account or a credit card, but does not pass the banking or credit card information on to the seller, can also be classed in this broader concept of digital cash.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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Discussion Comments


@JessicaLynn - The idea of digital cash makes sense, the way you're describing it. When you use PayPal, you're buying something with real money.

However, I will never understand why people use real money to buy digital money to use in games. My boyfriend used to work for a company that did technical support for an online gaming company, and he said the amount of money some people spend on those games is just astronomical.

I just can't imagine. All you're paying for is some pixels on a screen!


I used to be a big fan of having my paycheck deposited by electronic transfer. That is, before I worked for my last employer.

The company he worked with was just not competent. Either that or he made a lot of mistakes. Regardless, my paycheck was late a few times supposedly because of a mistake on the part of the company.

As someone else pointed out, electronic transfers take time. So when they discovered they made a mistake, they couldn't fix it instantaneously. Once I had to wait three days for my check!

Anyway, I no longer work at that office for many reasons. But the next time I do work in an office, I think I'll just go with a nice paper check.


The whole idea behind digital cash makes a lot of sense. I'm not that concerned about protecting my identity when I should online (after all, I don't buy anything I would be embarrassed about), but I do think it's convenient in other ways.

For example, if I want to make a transaction with PayPal, all I have to do is enter my PayPal identification. It's quick and easy. But if I decided to use my credit or debt card, I have to enter the card number, the expiration date, my name as it appears on the card...the list goes on!

I also have it set up so that my PayPal account is linked up to my bank account. So I don't have to worry about funding it-it just takes the money right from my checking account!


@MrMoody - I run a part-time business online and I transfer money to my PayPal account. I do it automatically however, in the way the article describes.

I have a set amount that my online account must reach and then it automatically transfers funds to my PayPal account, and then I transfer that to my regular bank account.

I love the convenience and the “set it and forget it” aspect of the whole approach. It’s a lot easier than having to physically request money each month or keep tabs on how much is in my account.


@David09 - Yes, a physical transfer does take place. I don’t know the exact process, but it’s one of the reasons that there is a delay of several days sometimes when you conduct a money transfer.

There are procedures in place that must be followed to ensure that your money transfers securely to the target bank. It’s usually wise as well to request a physical receipt from your bank that they have received the funds.

I don’t how the physical assets get moved from one location to another, but obviously if they didn’t then all of those numbers in your account would have no value. Digital cash is backed up by actual money, or it’s worthless.


One of the things that I’ve always wondered about is international electronic money transfers. Even though you can wire the money in digital form, so to speak, at some point the bank receiving the digital money has to actually receive the physical payment to back it up – whether that payment is actual cash or a banker’s cashier’s check.

I’ve always wondered how they did that, whether they just mailed a check or what. I can’t imagine that all monies are purely digital in form. The bank needs physical assets in its vaults I would assume.


I used to have a part-time job filling in surveys online and they paid me with digital cash. I would save up their cash to buy things in their online store.

Most of the items that you could buy with your digital cash were things like gift cards for retailers, airline miles and various small electronics. It seems to me that a lot of digital cash can be used to "pay" people without actually having to hand over any real currency.

I didn't mind cashing my digital cash in for air miles in the long run. I ended up getting some free flights out of the deal.


I am a huge fan of online shopping and digital cash is the easiest way to make a payment and probably the safest too. Probably the most well known example of a digital cash system is PayPal. I keep my account with them topped up then I am able to buy from oodles of stores online without ever having to give out my credit card number or any identifying information.

One of the things I find interesting is when I think about how I buy digital currency to use in the online games that I play. Real money is transferred from my savings account into PayPal, then I use my now digital cash to buy virtual currency. Talk about a digital economy!

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