PLASTIC MONEY MERITS AND DEMERITS
Technology has changed the way we deal with the purchase of goods and services in daily life. Plastic Money is one of the most common reasons for it. Plastic money is also known as polymer money which was first introduced in the 1950s has reduced the risk of carrying huge cash.
Plastic money can come in many different forms such as ATM cards, credit cards, debit cards, loyalty cards, prepaid cash cards, etc. and these cards can be used to make purchases in our everyday life. These cards are made up of plastic that is the reason why the name plastic money came into the picture. Plastic money is generally the substitute for cash or standard money. In recent years the use of plastic money has gone up drastically in India.
“Stores are never nice to people. They’re nice to credit card.” – J F Lawton
“People who recognize that money won’t buy happiness are still willing to see if credit cards will do the trick.” – E.C.MCKENZIE
“It is only the poor who pay cash, and that not from virtue, but because they are refused credit” – ANATOLE FRANCE
“In childhood, a library card takes you to exotic, faraway places; in adulthood, a credit card does.” – EVAN ESAR
STATISTICS – What Numbers have to Say?
- The results of the survey carried out in December 2017 in the U.S revealed that over 33 per cent of Americans owns two credit cards.
- Of the 875 million MasterCard credit cards circulating in the fourth quarter of 2018, 231 million were in the United States. This means that there were roughly two cards for every three residents of the United States.
- In 2016, credit and debit card payments contributed to approximately 45 per cent of the total cashless transaction volume in India.
- After the demonetization announced by the Prime Minister Narendra Modi of India on 8th November 2016, the number of digital transactions increased on a large scale. According to a survey in January 2017, the debit and credit cards at point-of-sale had the highest volume with about 253 million, while Unified Payments Interface had the lowest volume with just over four million.
- India had 44.2 million credit cards, 958.2 million debit cards in December 2018.
- In August 2018, there were 805.52 million ATM transactions and 357.17 million point-of-sale transactions made via debit card in India.
- In November 2018, there were 800.55 thousand ATM transactions and 145.85 million point-of-sale transactions made via credit card in India.
DESCRIPTION – Let’s take a Deep Dive
In this materialistic world, money has become our way of living. Everyone is trying to earn more money. Also as the people are getting rich day by day, the things have also become costlier than before and without carrying the bundles of cash it is not possible to purchase these things however thanks to the ‘Plastic Money’ wherein we can just swipe our plastic cards and purchase whatever we want. Life seems to be easy. Isn’t it? Well, it is.
Let us see the different types of plastic money.
- ATM Card – It is a card which allows users to withdraw money directly from your bank account through Automated Teller Machine (ATM) by entering a secret PIN.
- Debit Card – It is similar to the ATM card but the debit card can be used to purchase goods in the stores where debit cards are accepted. It does not have any credit or instalment facility.
- Credit Card – Credit card allows the user to purchase goods and services directly, unlike a debit card, the money is a high-interest loan given to the cardholder. It means even if there is no sufficient amount in the user’s bank account to purchase still he can purchase through credit cards but he has to pay interest over it at the time of final payment to the bank. Credit cards also have a set of spending limit.
- Customer Card/Store card – These cards are generally offered by the big stores. Customers are offered discounts on the products they purchase. They are also awarded coupons and points towards merchandise or some other reward in exchange for their voluntary participation in the program.
However, there are merits and demerits of these cards.
MERITS OF PLASTIC MONEY
- Handy Money – Plastic money is really handy. Plastic cards can easily fit into the wallets without making the wallets bulge out as it is the case when carrying a huge amount of cash.
- Water resistant – Plastic cards are water resistant hence you don’t have to be panicked even if the water spill over the cards, as it is not the case with cash.
- No Theft Threat – Theft or loss of cards is not a huge problem as the complaints can be registered with the respective banks wherein the banks immediately block the cards from further usage. This avoids the misuse of cards if any.
- Universal Acceptance – Cards can be used worldwide in many places. The problems faced in converting the cash you have into the currency notes of the country you are planning to travel are reduced.
- Online Shopping – Cards can be used to purchase goods on the e-commerce websites wherein you just need to enter your PIN or the CVV on the debit card and the password.
- Buy Now Pay Later – Credit Cards offer you the facility to buy now and pay later. Pay later of course with some interest, but higher interest rates can be avoided by paying the amount on time when the bills are received or at the end of the month, as per the policy.
DEMERITS OF PLASTIC MONEY
- Too much spending – Plastic cards generally encourage overspending. People tend to buy unnecessary things even if they don’t have enough money in their bank accounts just by thinking that they have credit cards. It can lead to too much debt which might even lead to bankruptcy.
- Service charge in some cases – In some cases, the bank charges some amount as a service charge when you are swiping your cards. For example, when buying electronic devices from the stores some extra amount is levied on card transactions which are not the case when paying in cash.
- Not used at small places – In India there are some places where cards are not accepted such as small retailers, Juice centres, Pan shops, Tea stalls, etc.
- Paying interest for not paying – Credit card allows us the facility to buy now and pay later. It gives us a specific credit period, but in case if we fail to make payments within the due date, some interest will be charged.
- Minimum purchase requirements – One of the disadvantages of using plastic money is that one needs to make a minimum purchase for swiping their cards. Suppose the minimum purchase amount is Rs 200 and you purchase goods worth Rs 180 then you can’t use card transaction in such cases, instead it forces you to buy some unnecessary things worth Rs 20 and fulfil the minimum requirement. Sometimes it leads to extra spending.
- Data Breach – In some cases when we are shopping online by entering our card details, there is a possibility of our financial data getting breached. Some websites are just set up to steal our all information and loot our money.
We are living in a world where people are using cash as well as plastic money. But we should know the merits and demerits of it and use our money wisely and efficiently. It is a well-known fact that plastic money helps us in a great way but we should also admit that this is not the case always. Whatever it might be, money has a value, use it wisely and do not fall victim to any kind of threats and theft.
Author – Vishal Malpure
Scrutiny – Mitali Shingne