Finance Minister has made a case for greater use of plastic currency. The developed world has moved substantially to plastic currency and payment gateways. And there is need for India and determination is there to gradually take steps to move in that direction.
The plastic currency refers to the usage of credit and debit cards. It also reduces reliance on paper currency notes.
PLASTIC MONEY: SIGN OF MODERNIZING ECONOMY
Money is always regarded as an important medium of exchange and payment tool. Initially barter system was used as the significant mode of payment. Over the years, money has changed its form from coins to paper cash and today it is available in formless form as electronic money or plastic card. Hence, the major change in banks which has been brought in by technology is through introduction of products which are alternative to cash or paper money.
Plastic cards are one of those types of innovations through which the customers can make use of banking services just by owning the card issued by bank and that too without restricting himself in the official banking hours. Plastic cards as the component of e-banking have been in use in the country for many years now. However, the card-based usage has picked up only during the last five years.
Payment by cards is now becoming a much preferred mode for making retail payments in the country. Thus, plastic cards are such payment tool which gives a customer an opportunity of non cash payment of goods and services and are designed to facilitate small value retail payments by offering a substitute for bank notes and coins and thus to complement traditional payment instruments.
TYPES OF CARDS
i. Credit Cards
The term "credit card" generally refers to a plastic card issued to a cardholder, with a credit limit, that can be used to purchase goods and services on credit or obtain cash advances. It is issued by banks holding the logo of one of the bank card association like Visa, MasterCard, Dinners club etc. after proper verification of accountholders. Unlike debit cards, credit cards also provide overdraft facility and customer can purchase over and above the amount available in his account and thus regarded as authentic payment tool.
Interest charges are levied on the unpaid balance after the payment is due. Cardholders may pay the entire amount due and save on the interest that would otherwise be charged. Equated Monthly installments (EMI) scheme is also offered by some banks to the customers who make huge purchases so that they can feel convenient while paying back the outstanding amount. Clearing and settlement through credit card is a simple and reliable process in which bank plays a crucial role.
ii. Smart Card
A plastic card containing a computer chip and enabling the holder to purchase goods and services, enter restricted areas, access medical, financial, or other records, or perform other operations requiring data stored on the chip. Smart card is currently introduced by BRTS which stands for Bus Rapid Transit Services in Gujarat and Delhi Metro in India.
iii. Charge Card
A charge card carries all the features of credit cards. However, after using a charge card you will have to pay off the entire amount billed, by the due date. If you fail to do so, you are likely to be considered a defaulter and will usually have to pay up a steep late payment charge.
iv. MasterCard and Visa
MasterCard and Visa are global non-profit organizations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customer’s world-wide may use their respective credit cards to make various purchases.
v. Debit Cards
Debit card is a magnetically encoded plastic card issued by banks which has replaced cash and cheques. It allows the customers to pay for goods and services without carrying cash with them. In some cases, debit card is multipurpose which can also be used as ATM for withdrawing cash and to check account balances. It is issued free of cost with the savings or current account.
Debit card is one of the best online e-payment tool through which the amount of purchase is immediately deducted from customer account and credited to merchant’s account provided if that much amount is available in customers account. It has overcome the delayed payment process of cheques, due to which sometimes merchants have to suffer. There are currently two ways that debit cards transactions are processed
1. Online debit(also known as PIN)
2. Offline debit ( also known as signature debit)
vi. ATM Cards
These cards are typically used at automatic teller machines (ATMs) to withdraw cash, make deposits, or transfer funds between accounts. ATM card is used by inserting the card into an automatic teller machine and enter a personal identification number, or PIN, for security. The system checks the account for adequate funds before permitting any transaction
ADVANTAGES OF PLASTIC MONEY
• Purchasing Power: Credit or Debit cards made it easier to purchase things. Now we don’t have any need to carry hard cash in a large amount. Plastic money is accepted everywhere, anytime.
• Time Saving: Through a credit card or debit card you can purchase anything from anywhere without spend money on fare or cash transition. Just provide your card details to seller store or companies and finalize your order. Now you don’t have need to worry about time wastes. Use internet for minimum time consuming.
• Extra Safety: While you are not carrying cash, how can it be lost? But if your card has lost, just contact to your bank or financial institution, which provide you cards. It will block the account and nobody can draw a single coin without your permission. So it is 100% safe without any tension.
DISADVANTAGES OF PLASTIC MONEY
• Shops Using Other Vendors: There are numerous shops which accept credit cards of a specific company only. In this situation the cash is the only way of payment for those who use a credit card of another company.
• Less Global Availability: there are many cases where various companies do not permit their cards to be used in areas where they have a regional dispute with.
• Worn out Magnetic Strip: The magnetic strip of a credit card can get worn out due to massive use. If such a condition happens while travelling, and this is the only way of cash that the consumer has, then he or she has to wait till the time they receive a new card, which can take a minimum of 48 h.
• Increased Debt and High Interest Rates: Credit Card provider financial institutions and companies charge high interest rates (may be 10% to 25%) on extra money if you fail to pay off up to the fix date of the month. This interest is their earning, for which they give you extra buying limits then your money. This is not a good idea that you owe loan on high interest rates and spend it in unnecessary things or purchasing. This is complete money wastages.
• Fraud: Credit cards can be stolen. A thief may be use them directly or to get their information (which is required in money exchange). In today’s technical intelligence it is also possible to get a clone of any credit card or debit card, which works like original and they can be give you a heavy financial loss. So be aware from credit cards fraud as they are like stolen your money from your pocket without your information.
Reserve Bank of India Pitches for Cashless Society
With the Indian economy expanding rapidly at more than 7.5% per annum and the middle-class budding, several financial firms believe and predict that the use of plastic money in India will become very popular. However, according to the recent estimates by the Reserve Bank of India (RBI), the use of cashless transactions through credit card usage among Indians is actually falling.
The Reserve Bank of India (RBI) has prepared a road map to provide card swipe machines to more than one crore retail businesses in the next three years to promote electronic transactions for ushering in a less-cash society in the country.
According to the road map prepared by the central bank for cash-less transactions, all schools and colleges in the country will also be equipped to handle plastic transactions. According to an RBI estimate, only six lakh retail traders accept credit card in the country. Steps are being taken to make the facility available to at least one crore retailers by 2015.The government and its financial institutions will initially bear the cost of each card swap machine made available to retailers.