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Buying a House With Cold, Hard Cash

This article was written by in Real Estate and Home. 33 comments.


When I write about the unbanked, the vast majority of this category of consumer avoids the financial industry due to lack of trust in the industry or a belief that living paycheck to paycheck doesn’t necessitate the fees and hassles of including a third party in financial transactions. Cash, in some respects, keeps you off the map. Also, it’s more likely that those avoiding the mainstream financial industry and opting for alternative financial products like payday loans and check cashing services live within lower socio-economic status communities.

That isn’t always the case, though. Here’s an interesting question I received from a reader:

I read your article on how to buy a house with cash. I will be in that situation in another year or two, moving out of state. But my question is, how do you buy a house using actual cash money and not checks or wire transfers? All the cash was obtained legally, but if I deposit it all at the same time into a financial institution, then write a check at closing, would that not sound all kinds of bells and whistles at the bank and IRS?

I understand that any transaction of ten thousand dollars or more and the bank is obligated to contact the IRS. I’ve already paid tax on this money and don’t want or need the IRS hounding me. So, what are your thoughts and ideas?

CashThis is an interesting question. Usually, when people talk about buying a car or a house with cash — I bought my car with cash — they’re usually referring to paying by check or bank transfer. Carrying thousands, tens of thousands, or hundreds of thousands of dollars in bills is not only inconvenient, it’s risky. If you lose your checkbook, you can cancel your checks. If you lose a briefcase full of cash, good luck.

But before we get to the logistics of paying for a house with cold, hard cash, it might be good to address the reader’s assumptions.

Banks are required to report some transactions to the government. Transactions over $10,000 — or multiple smaller transactions that add up to over $10,000, or a transaction for $9,999 when you change your deposit amount when the teller mentions your transactions over $10,000 will be reported — are reported on a Currency Transaction Report and filed with the IRS. Another form is required if the money travels into or out of the United States, to or from a foreign country. If the bank has some reason to believe the transaction is related to something illegal, they would need to file a Suspicious Activity Report for the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department.

You can download the Currency Transaction Report here, directly from the FinCEN. I am neither a lawyer nor a tax expert, but depositing a large amount of cash for later withdrawal is not an uncommon practice at banks. If you’re not trying to hide anything from the IRS, if you’re not doing anything else illegal, if you don’t have a suspicious appearance, and if the teller doesn’t have any reason to think you’re trying to hide something, you shouldn’t have any problems.

I believe that process is much easier than showing up to a house contract closing with a briefcase or sack full of cash. In my opinion, that’s more suspicious than showing up at a bank for a large deposit. This would require everyone to count the money, bill by bill, at least twice.

Seeking some advice from a professional, I asked Barbara Friedberg for her thoughts on the matter. Barb has been working in the real estate industry for decades, and is currently the chief financial officer and portfolio manager of a real estate holding company. She also finds the time to be the writer behind Barbara Friedberg Personal Finance. Bringing her experience with real estate deals to Consumerism Commentary, here is what Barb suggests:

Yikes, a suitcase full of cash, I assume you mean “real money.” The reader needs to deposit the cash in a bank. Then she needs to check with the bank to find out how long they need to hold it before she can withdraw it. At the real estate closing she needs to bring a cashiers check or arrange with the bank for a wire transfer. I suppose bringing cash to a closing is possible, but… I checked with my real estate experts, and my own experience suggests that this is infrequent at best and at worst, quite dangerous.

There is the problem of malfeasance on several fronts without using the security of a cashier’s check or wire transfer. The realtors and closing agents are given free reign with tens of thousands of dollars. Your proof of ever paying the cash is limited to a flimsy receipt.

My advice, deposit the cash, and schedule the closing for a date when the reader is certain she can have full access to the cash.

It sounds like bringing cash to a real estate closing is a bad idea.

I’d love for more Consumerism Commentary readers to weigh in. If you’ve worked as a bank teller, how did you handle large cash deposits? If you’ve been involved with real estate transactions, has any party ever brought a bag full of cash to the closing?

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Published or updated February 24, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 33 comments… read them below or add one }

avatar Einstein

I was under the impression that buying a house with cash simply meant no financing – at closing a cashiers check or even personal check in the event the house is sold by a bank to a member. I, for one, would be concerned about fraud, counterfeiting, or illegal activities – drugs, distribution, or what have you.

I’m interested to hear more about this. I’ve never been in a position where buying a home with cash made sense, so this is all new to me.

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avatar Kari

I wish I had a suitcase of cash. I wasn’t aware that transactions over $10,000 are tracked. I just transferred 10k to my checking account from my saving account to use as a “good faith” deposit on a house we’re buying. Now I guess the IRS will be “watching me”.

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avatar Luke Landes ♦127,480 (Platinum)

I doubt you’ll be “watched” because of that. The CTR is used for currency transactions (those involving cash). The form to watch out for is the Suspicious Activity Report, but that won’t get filed unless a teller thinks you have dangerous intentions.

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avatar lynn ♦155 (Cent)

I once transferred a little over 10000 from my savings to checking to pay off a vehicle. The government knew about it and considered it income. So I paid taxes on it rather than getting in a (blank) contest with them.

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avatar Well Heeled Blog

I was watching an episode of HGTV’s House Hunters International – and in a lot of countries you do have to bring a suitcase full of cash. That’s way too nerve-wrecking for me. Knowing me, I’d leave that suitcase in a restaurant or something.

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avatar Modest Money

I suspect a lot of people in this situation end up depositing the cash in an overseas bank with the hopes of avoiding getting detected by the IRS. I don’t recommend that route though as I’ve heard of a bank somehow ‘losing’ someone’s account money when they tried that. It does sound like you pretty much have to deposit the money in a bank to buy something as big as a house.

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avatar Brent Pittman

Wow! That is a lot of cash to have on hand. The thought of paying for a house with cash in hand is a fun idea to entertain. Perhaps with that amount of cash they have reason to want to avoid the banks?

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avatar krantcents

In so many instances cash is convenient, except this one. I think there may be a concern over counterfeit currency too. One the official closing occurs it is very difficult to undo.

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avatar Barbara Friedberg

Hi Flexo, Keep us posted on the outcome of this reader. I’d like to know what happens. I’m curious why the writer doesn’t deposit the cash in the bank. It’s insured by the FDIC up to $100,000. If he/she has more, put it in a few accounts.

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avatar eric ♦1,549 (Half-Dollar)

Thanks for contributing your thoughts on the post Barbara! I enjoy your blog.

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avatar Holly

I thought FDIC insures up to $250,000 per account (so long as they are in different banks or, if at the same bank, they need to be in different ownership categories, i.e., $250,000 in a high-yield savings account and $250,000 in a certificate of deposit). Can anyone say if this is this accurate?

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avatar DonnaFreedman ♦75 (Newbie)

The day you decide to carry a briefcase full of cash might be the day you are chosen at random by a mugger. Or it might be the day you’re a bit careless and you misplace the “paid in full” receipt.
Here’s hoping the person meant “I have enough saved up to buy it without a mortgage.” I, too, would be interested in a follow-up.

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avatar Olivia

I bought and sold cars over $10,000 with actual, literal, cash and I did run into minor snafu’s.

In purchasing, I wanted to have cash on hand because I wasn’t sure I was going to buy the car until I saw it, and I wanted cash on hand to negotiate. well, I had to wait at the bank for about 90 minutes before they would release me my money. Reason being, I had only recently opened the account a month or two ago, it was a huge % of the money in that account at the time. They had to get it cleared by HQ and maybe it was suspicious looking or something. Also the money came from a pseudo overseas bank (I was working overseas for DoD at the time). So perhaps I did have to go through the suspicious rigamarole. Anyhow, they verified that it was a legitimate transfer from the overseas bank somehow, HQ eventually cleared it, blah blah blah.

I sold the car to another person later and we went to her bank to make it happen. They wanted to charge her money for a cashier’s check, but well, cash was free, so cash it was. She even called in advance to make sure they’d have the bills on hand to pay it out. Well the teller gave us all kinds of attitude, and said she couldn’t give me hundreds. I had $13,000 in 20 DOLLAR BILLS.

So yeah, honestly… unless you have some kind of aversion to banking, I would recommend two things, using an established account, and doing things at least a couple days in advance, if you have to go the cash route, because it is weird and they will need to make sure you aren’t a terrorist or something.

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avatar someguy

I’m sorry but the only reason someone wants to buy a house in the US with actual cash is they have something to hide. Cash leaves little to no paper trail itself, which is a huge negative to the buyer unless he/she has something to hide. Of course the assumption is that it’s something bad/negative, which does seem more likely. I suppose someone in witness protection might have a legitimate reason, but I’d assume in those cases the government is involved and has even better means of hiding identities.

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avatar elizabeth

wrong. Islamic religion doesn’t allow traditional mortgages where paying interest is involved. There are Islamic lending agencies, but some consider them to be a way to get around interest. My husband & I have nothing to hide but want to own our house outright & want to avoid interest. We only use checking accounts for this reason.

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avatar Ceecee ♦53 (Newbie)

Wow, it seems way too dangerous to carry a suitcase full of cash. I can’t imagine why a person would want to do this. (except for the obvious, ya know, illegal stuff) I know a few people who only deal in cash, but none have enough to buy a house.

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avatar Jenna, Adaptu Community Manager

Interesting thoughts. Not sure I’ll ever have a suitcase of cash to buy a house, but isn’t that their right? Also, have you read The End of Money?

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avatar qixx ♦1,890 (Half-Dollar)

I think the most telling thing in this article is the responses from the readers. There is a huge bias/invisible script/concern/aversion to buying larger ticket items with cash. Could the reason be nefarious? Maybe, but maybe not. But always remember – “Cash is King”.

While not a house let me use an example of buying a car. I had $8000 in cash on me when i went to a dealership to buy my first car. The car i wanted had a sticker price of $14,000. Long and short – the sales manager would not go below $10,000 even when i finally said i had “cash in hand”. He too thought i meant have the funds in bank for payoff. When i took the cash out to show the sales manager and said i have $8K the price magically got to that $8K number. I left without the car because i’d worked with every salesman they had and all treated me poorly. Needless to say i bought my first car elsewhere, by check, after depositing the funds (i was not comfortable having that much cash on me at once).

I bet the same works with a house. As for the “paid in full” receipt … i believe it is called the title/deed and would still be processed by title company. There will still be court docket papers to show the transfer of ownership. Using a bank or not there will still be some form of paper trail. The only concern would be to make sure the selling party knows you will bring actual cash so as to have a banker/someone on hand for the “funds transfer” on their end (i’m guessing the opposite party might be uncomfortable taking possession of such a large amount of cash).

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avatar SomeGuy

qixx, I’m thinking perhaps you haven’t purchased a house? I have lots of real estate experience and it’s different than buying a car in ways critical to this discussion. First, except in very unusual circumstances (Sheriff’s auction, e.g.) no one ever walks in to a house for sale and takes legal possession that day. At a minimum, there are going to be title searches to ensure that the property is not encumbered by liens or other issues. In a normal consumer purchase, there is also typically going to be an inspection and oftentimes as a result of that inspection a request to remedy. There a a number of other things that usually take place in a normal consumer real-estate transaction that slow the process down — offers that are legal documents at least several pages long and often controlled by state/federal law, just for example.

As others have pointed out, there are major risks for the seller in an actual cash transaction. If some or all of the cash turns out to be counterfit, the seller faces a major uphill battle to get his/her property titled back to them. It’s easier to repo a car. In fact, most dealerships have you sign paperwork that includes clauses about such situations, and dealerships often give you possession the same day but don’t transfer title until they are sure everything is kosher.

The bottom line is it’s nearly impossible to complete an entire real estate transaction in one day and in the same manner as a car. This completely removes the negotiating power actual cash has. Having said that, a “cash offer” can be very attractive in real estate. This usually simply means the buyer has cash instruments available (wire, cashier’s check, etc.) and will not be taking out a loan to complete the transaction. This assures the seller of a relatively quick closing (perhaps 2-3 weeks at the quickest, depending on other factors) because they don’t have to worry about the buyer’s financial situation changing or having changed since they got prequalified. In today’s down market, it also means the seller doesn’t have to worry about the appraisal coming in lower than expected and the buyer’s lender then backing out.

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avatar Matt Ouellette

What is the advantage of a car dealer or anyone else taking “physical” cash over a check? The only one I can think of is tax avoidance.

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avatar Nick

Buying a house “for cash” has long been a goal of mine. Buying a house “with cash” seems pretty pointless. I’m first generation Greek-American with many friends in the restaurant business, so I’ve seen my fair share of cash transactions, but there’s just way too much that could go wrong on such a HUGE purchase for this to make sense. If it’s a $25,000 REO and you temporarily raid your safe deposit box from the $200 per week you’ve been “pretending never existed” for the last three years, I guess it could happen. But I’m with the general consensus. Put the money in the bank and have a paper trail of the payment. FDIC is up to $250,000 per account type still, I believe. It’s certainly higher than whatever Jet Blue gives you for lost suitcases full of cash…

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avatar SophieW

Why on earth would someone have that kind of money in cash? Are they really that scared of banks, or did the cash come from suspicious means? Either way, having that much money floating around is just asking for trouble. Either someone nefarious will get wind of it and then come try to take it, or at the least, it’s just sitting there under the mattress, losing value!
I strongly suggest this individual puts the money into a high interest savings account, so it will at least keep up with inflation (ish…) and handle the house purchase in a much more dignified manner!

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avatar Melissa@LittleHouseInTheValley

I wonder why the reader who wrote in wants to avoid a cashier’s check?

In addition to the concern that the real estate agent could do something with your cash, imagine how the agent would feel having to hold on to all of that cash. No thanks.

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avatar Jammie

We did a “cash” house deal back in ’05 and here’s the story.
We are Immigrants from a Caribbean country. we never grew up learning about, using, nor needing “credit”. So when we came to the US we continued using cash for everything.
We never ever had a store card, credit card, borrowed from a lending institution or owed anything that was reported to collections – hence no “credit file” at any Credit Bureau.

Well, after living in the US for about 20 years and during that time wasn’t sure if we would “retire” here (we have homes and businesses back in the islands), we decided to purchase a home in Maryland.
Prior to that, we had purchased all big ticket items – several used vehicles, 2 new vehicles, all furniture and appliances, medical bills, rent, etc with cash or personal cheque (yes we had a few bank accounts). So we started the home purchase process firmly believing that we wouldn’t have any problems – we had the whole amount ready, 70% of the cash on hand and 30% in a CU.
BTW, for those who are thinking any of this cash was illicit or illegal, stop. All our earnings are from legitimate businesses and gainful employment, and we paid taxes on ALL our earnings.

However, following our real estate agent’s advice to get a mortgage (something about investment earning vs mortgage interest is a greater benefit), we tried to get a mortgage from our CU.
Couldn’t happen was their response, because we had no “credit file”.
So we continued the purchase process with the intention to pay in cash/cheque.
The seller initially seemed happy with this, then a few days before closing, we were told that the seller would require us to close with cashier’s cheques only.
No problem we thought …. we approached our CU and asked to deposit the extra amount needed for the purchase – 70% cash we had under our bed :-)
Then we would be asking for a cashier’s cheque for the full amount to complete the purchase.
The CU stopped short of telling us we were doing something criminal, in fact they started to treat us like “suspects”. After lengthy discussions/explanations with 2 managers and proof of income/business and producing our prior 3 years taxes records they still were reluctant to accept our cash. My wife was so upset, we decided to take our business elsewhere.
After closing the account at the CU took around 3:30pm that day, we were told that our fund wouldn’t be available before opening the next morning and we could only get a cheque not cash for our funds. We wanted cash, just to be as difficult as they were.

Anyway, we went to a national bank we had a business account with, had to tell our story to a manager there (we probably never had to speak with a bank manager before), and pretty much had to produce proof of earning/business and taxes before everything was completed.
But it was done much nicer, we were treated nicely. And yes, there forms we had to sign relating to the IRS and some other agency (can’t remember which, probably the same ones mentioned above) but we didn’t care about gov’t scrutiny ’cause we were not doing anything illegal.
So after the glitch – 4 or 5 day delay I think, we had everything in order to complete the process.
Luckily too the seller was patient and understanding. So we got it done with a cashier’s cheque at closing.
Bottom line …… for such a big purchase, cash was not the way to go.
It was an experience, and I could see things getting worst at times or the seller could have backed out.
Now, we are comfortable in our home, we never had a call from any gov’t agency about the transactions, and we plan to “retire” to the warm beaches in the islands after the grandkids grow up a little bit more AND we still do not have a credit file.
No we won’t be buying another home in the US :-)

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avatar qixx ♦1,890 (Half-Dollar)

I thought of three more things that may help us give better advise.

Is this person looking and planning to purchase a bank owned home. The cash may be less of an issue if the seller is a bank and has the ability to verify the funds are real and check the history. They will likely want to see proof of income still but may not have an issue with cash.

Is this person famous or some other form of celebrity? A movie star or pro athlete may have less problems from a seller/agent/etc when they show up with cash. Assuming they are buying a modest (not multi-million dollar) home.

Is the buyer or the seller from a background where they would not want to use a bank for other reasons not mentioned. I’m thinking along the lines of Amish (buyer or seller) or some other religion. Perhaps a reformed former felon that is not allowed to have or can’t get a bank account. Any other reason the person wants to avoid a bank?

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avatar KendallG

Flexo, I work currently as a bank teller and large cash deposits or withdrawals happen on a daily occurrence. We count, count it twice, process the CTR and wish the customer a good day. For very lage transactions we may take the customer into a private cubical to count the cash. I always recommend a cashiers check as an alternative, with the fee (if any) waived.

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avatar Young

Walking with that amount of money in cash sounds way too dangerous. Along with the danger comes the question of who is going to sit and accurately count $10,000. Danger and the possibility of miscounting make this a very bad idea.

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avatar IRECZAR

After reading all the comments, its sad to say that the people against a self financed “all cash” transactions are paranoid and full of suspicion even more so than the person who wants to pay “all cash” for the property who states no real suspicion or paranoid attitude towards banking or “the system”.

Furthermore, if it were illegal to make large transactions in cash then the Federal Reserve would issue money only to be used up to certain amounts or quantities (say up to $10,000.00 max) and give specific and explicit instructions that anything over that certain amount must be done by using official instruments issued by banks or other financial institutions (like certified checks, wire transfer or other) however that is not the case.

As “SomeGuy” rightfully points out, any property transaction will take several days to put together before actual “money” and for that matter “title” changes hands. A person considering this type or any type of transaction related to the purchase of a property has to make sure he does all his due diligence (zoning, property title insurance, etc.) for his intended use of the property and that he crosses his “t”‘s and dots all his “i” in the contract(s) and deed during the transaction and to let the participant(s) know (when it’s close to be finalized) how he plans to pay for the transaction, that way everyone is in agreement of receiving the cash because the seller or financial institution if it’s financed may not want to take the cash (and that has happened in one or more occasions). Also, since it is not a typical transaction because of “payment tender type” he should hire a real estate lawyer to double check the contract(s), deeds, appraisal, title insurance, zoning, etc. because it would be sad to buy something cash and have some sort of problem later down the line. It would still be a problem for a person who financed the transaction through a lending institution if something went awry or was not done right but the same laws, insurances and legal agreements bind all the participants regardless of tender type at closing so the cash should be as protected as the financing option as long as all things are done according to law and the business practices of the area.

“Jammie” from the Caribbean also has a good story to tell and frankly that’s the way business is done in most parts of the world (~6.5 billion people on the planet vs ~350 million in the USA). Just because it’s not done this way in the USA doesn’t mean its illegal, illicit, nefarious or otherwise.

-The Investment Real Estate Czar – Close to $1 billion in real estate and business transactions since 1992

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avatar jim

I don’t think its smart to accumulate that much money in hard cash to begin with.

YOu’re losing out on interest from that money and you are taking a valid risk it will be lost due to theft, fire or some other reason. I really don’t see any good reason to pile up >$10,000 in physical cash.

I don’t think its unnecessarily critical for people to wonder why she has that much money. Usually people do that for 3 reasons : they are paranoid about banks, they are obtaining the money illegally or they are evading taxes. None of these are good reasons to have piles of money. I can’t think of any other legitimate and valid reasons to pile up tons of cash. Are there any?
I trust the writer that it is all legitimate. But you can’t blame people for wondering. Of course if you simply like having piles of cash on hand then thats your right, but again you’re losing interest and risking the loss of the cash.

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avatar tobi

It is sad people aren’t free to work hard, and save and use cash to buy anything they want without banks and our government knowing everything. After the dollar drops this summer and the US treasury notes will be used instead of bills as now– things will change. Bush signed the North American Treaty and the dollar is on the way out. Our gov. wants to know what you buy and keep track of everyone so money will be the old way of spending and something like those smart cards that Iraq is going to be using for its people and as it pays the contractors these will be used. People like having money and like to be able to keep their own money but sadly this will be gone sooner than everyone thinks. Bottom line-get used to using the bank or like one post move to another country for the freedom of spending with cash.

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avatar joe

i did not know that it is a law that people must put they money into banking institution.
that bill will be law soon. so people can be tracked all the way

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avatar cashISking

Some of you are acting like your money is so much better sitting in a bank…c’mon the 2007 banking/mortgage crisis didn’t jerk your chain. I had 401k, credit cards, bank accounts etc. Mostly because a record of expenses statement would generate each month & plus it was easy. These days I like cash, especially in this new digital age we live in. So my legitimate stash of cash will be used to purchase another home. For those wondering, no I dont walk around with a briefcase. I do my homework, decide on the expense, and digout the amount of cash needed for a purchase. My grandparents were wise & taught me to live by the rule of cash no finance!

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avatar another day

ill be honest,. I have 96650 dollars sitting in my safety deposit box.. Why? because I was paid with cash in multiple amounts over a year for my work on different projects, under the table by a few clients. I don’t know why I didn’t deposit it, I’ve been paid in cash many times before.. but over the last year for some reason or another ive gotten a lot more then previous years. I didn’t want to claim it, plain and simple and I want to use it as my deposit for a house. There is also some sort of feeling I get when I know I can just do what ever I want with my money. I also go to many auctions which require lots of money and dealing in dollars is easier to do then going back in with a cashiers a day later. Been there done that. Surprisingly it doesn’t take that much room you can fit 20k in a money envelope so about 5 pouches. I think if you really squeeze maybe 25k, I’ll try that tomorrow as see.

I didn’t want to keep it in the house so I put it in a safety deposit box which is illegal btw,. and still does not insure any of it by fdic. Walking around with money in the usa is safe and unless you have a flag around you, who would know. Most of the comments here is from people who just don’t know or are retarded

I’ll say this, I find the article written here is very poorly written and this lady barb seems like your off the street relator who knows nothing. I just wanted to tell my story and for some reason I didn’t actually see anyone who really has much more experience then a few thousand dollars then Jamie here which is a very real story that many people have had problems with and you can find and hear those stories on npr.

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