Introduction to Plastic Money

Money- One of the most important factor for living life. How did all start,
in history you might have learnt batter system where goods were traded for
goods, then came an era where gold and silver coins came into being, then we
modernized we stared using paper notes and coins for trading of goods and
services. We got more modern and for a number of reasons we stated using
technology to transfer money for our goods and services. Now you can say that
technology here means use of plastic money, plastic money can be your debit or
credit card; technology can also mean wire transfer of funds from one account
to another and the use of internet for your various banking transactions.
Yes plastic money is use of technology for transferring money into
another bank account for your goods and services. Have we realized why is
government getting so specific about using technology for transferring money
from one account to another? These transfers need not be just within the same
bank or the same persons bank account, it can be a third party transfer into
either the same bank or any other bank, in the same city or to another city, even
transfer of money to another county is possible using technology.
Technology has taken over the globe and it dominates as it is used in almost all
types of businesses, companies and industries. No industry on this planet now
can survive without technology these days. Reason is extremely clear, with
growing modernization and businesses it is important to simplify the everything
by maintain records, use various methods to track business, compare yourself
with your competitors, etc. everything, almost everything can be made possible
with the use of technology.
Why technology for financial transactions, isnt its risky?
Every aspect in life has its own pros and corns. Unlike the
regular banking going to the branch you hold your account with and waiting in a
long queue to withdraw or credit the money or cheque you have received,
technology has helped us use ATM (Automated Teller Machines) and debit
cards to withdraw or wire transfer to transfer money into someone elses bank
account, similarly the person who owes you money or who need to give you
money can transfer the same into your bank account. Of course money transfer

is mostly for the exchange of goods and services; however there need not be a
reason for a transfer.
Now because these transactions are mostly transfer of money online they can be
risky as may be your computer or your internet knocks off and the transaction is
not processed successfully and the money leaves your account. What if the
account is hacked and money is all taken out of your account? What if the ATM
machine does not return your debit card? What if there is a fraudulent
transaction? And many such questions bother you and do not allow you to use
technology when it comes to monetary transactions. To some extent yes using
technology for financial transaction is risky, like every coin has two sides so do
these transactions; however keeping all the negative aspects in mind the banks
and the RBI (The Reserve Bank of India the regulator for all the banks in India.
Every bank in India needs to function under the regulations and guidelines set
by the regulator.) have set few processes and a few guidelines they need to work
under for technical transaction to make sure that the consumer does not suffer.
Fraudulent transaction and transaction due to failure of technology can be traced
and returned back to the consumers account all you need to do is call the bank
up or email them the issue you have been facing of the transaction that has
failed and the money that has left your account. The recovery of money might
just take a few weeks to come back into your account; however it does come
back; you do not lose your money to technology.
Latest banking technologies
Technology for banking has simplified banking and reduced time it consumed to
process transaction by introducing the following and there are various types of
plastic money:
1.

Core banking
Core banking is anywhere banking with the same bank be it any location. For
example if you have an account with ABCD Bank LTD, in X location or X
branch you can also process your transaction in Y location or Y branch. All this
can be done without sending the cheque outstation for clearing the transaction.
This saves on time and money for sending the cheque for clearing to another
city.

2.

Debit cards
Debit card is the real, real plastic money; similarly credit card is plastic credit
that you receive from a financial institution for various reasons in exchange of
interest that you own the institution for utilizing their money. Debit cards can be
used for shopping, paying for fuel, grocery, withdrawing money from the
automated teller machine. You do not need to carry hard cash for buying of
goods and services these days, your debit card will do it for you. There are
many advantages of plastic money attached to it.

3.

Wire transfer
This technology saves you the hassle of going down to your nearest branch,
writing down a cheque to a third party, waiting in a long queue to get a simple
transaction processed. All you need for this transaction is a computer or a laptop
and the internet connection. Within a few minutes you can transfer money into
the beneficiarys account. All you need to do is set up a beneficiary account for
this transfer.

4.

Pay bills online

This technology is set up just to pay bills online; the reason behind setting up
this technology is minimizing the use of paper and going green by simply
transferring money online to the beneficiary be it your electricity bill, gas bill,
phone bill, DTH recharges, etc, most of your bill payments can be made on line
through internet and wire transfers. Why do you even need to see the face of the
bank?

5.

View and manage your money online

You have a facility of e-statements and viewing your bank account online.
Using this facility you can keep a track on your account, estimate the money
you consumer monthly, analyze your budget and also plan your savings online
by seeing various investment options available for you online.You can also
manage your investment accounts with the same bank using the same passwords
given you by the banks.

6.

Mobile banking

Services at your finger tips or banking at your finger tips is the best explanation
for mobile banking. You can activate SMS alerts for any activity processed on
your bank account. Now to process transactions through your mobile phone or
your smart phone and make the most out of it all you need to do is download the
application of your bank as per its guideline and process transactions, pay your
bills, etc through your mobile phone.

Image source: pixabay.com

There is a lot more that you can do using technology for your banking or your
financial transactions for example; set up fixed deposits online, invest money in
the investment you like online, order chq books online, order demand drafts
online, transfer through NEFTs or RTGSs using your account online, and a
much more, most of the banks provide you with almost all the services these
days and all you need to do is either go down to your bank personally and meet
up with an advisor to get the plastic money information, or you need not waste
time walking into the branch and directly go to the website of your respective
bank and see the services they provide and how to activate these services.
Why are we emphasizing on using technology for financial transactions
Emphasis on using technology has a number of reasons. Lets quickly have a
look at these reasons.
1.

The cost of printing currencies

The studies say that RBI spends close to 2500 cores on simply printing
approximately 17.00 billion currencies of various denominations, this number is
only set to rise, which means if the printing of currencies rises, the cost of
printing will definitely rise. Printing one single Rs 1000 note cost the

government nearly 3.50 per note. This is a lot of money. The government is
spending a lot of money in only printing currency for the people of India.
2.

The cost of disposing currency

The banknotes that you use as your currency is made up of composed cotton,
cotton rags and paper. This material is fragile to be used and besides you never
know how many people does the currency travel to and how do they handle the
same. Someday the currency will tear and lose its worth. These currencies need
to be disposed. RBI not only bares the cost of printing currencies it also bares
the cost of disposing them. The disposing cost is approximately 210000 on daily
basis. This means the regulator prints the currency and disposes currency daily
and also spends money on both the activities.

3.

Go green
By using technology and plastic money we can save a lot of trees. Printing of
currencies, account statement and other transaction reports will reduce cutting
of trees which will save trees and save us from the weather disasters the globe
has been facing due to commercialization and destroying nature. A little effort
put in by you can really matter in protecting and saving us from further
destruction.

4.

Anytime anywhere banking at minimum cost and effort

Online banking does not restrict you to the banking hours and location. It gives
you a leeway of banking from any location at any hour of the day without any
fuss or extra cost or charges. You do not need to spend time and money to travel
to the branch and back, you do not need to wait in long queues do get
transactions processed, you do not need to get hold of an advisor to book your
investments and your fixed deposits, in all you do not depend on a branch or a
bank employee to bank or process your banking and investment related
transaction. You can do it all by yourself and at your ease.

5.

Keep a track on your account and pay your bills on time

You need to not go to the bank or your service provider to pay your bills; you
can make sure you pay them at home at your convenience on the time suitable
to you. You no longer need to get into a long queue to get your passbook

updated or wait for the entire month to receive a printed bank account
statement, all you need to do is go online and update SMS alerts to keep a track
on the transactions and the balance of your bank account. Banks use technology
that sends you alerts on each transaction that takes place on your account.
Receiving updates and having access to your bank account you can keep a track
on your account this will make you feel secured about your money and help you
keep a track on the transactions be it incoming transactions or outgoing
transactions.

Advantages of Plastic Money

There are several advantages of plastic money as seen in the above
illustration. The advantages include
1.
2.

3.
4.
5.

Eliminates the need for carrying huge cash: This

eliminates the need for carrying huge load of cash which is
risky and inconvenient too.
Risk of Loss or Theft minimized: In case of cash there is a
high risk of losing cash and a chance of cash getting stolen.
However, in case of debit/credit card you can report the matter
to the bank and block the card to avoid misuse.
Anytime/Anywhere Access Using cards you have the
unique advantage and convenience of using it anywhere in the
country or even abroad.
Credit Facility: In case of credit card you have the option of
buying on credit or paying later. Although the charges are high,
it helps you in case of emergencies and contingencies.
Online Payments: You can use cards for online payments,
fund transfers and various other transactions.
These are the key benefits which I can easily remember, but there could
be various other good features too that are specific to certain cards.
Disadvantages of Plastic Money
So far Ive been sounding like a nice, pleasant Bank Executive who is
convincing you to open an account. Please note a few points before we
look at the disadvantages of plastic money

Cards/plastic money is not a complete replacement for

cash

Use of cards can also be risky in some cases

Note: Im not saying that cards are not useful because of these
drawbacks. The disadvantages are just to make you aware of any risks,
threats, etc so that you can use it carefully.
Some of the drawbacks or risk related to cards are
1. Non-Acceptance at Small Retail Outlets
Unless you are a person who shops only in supermarkets and
hypermarkets you will be forced to use cash
2. Cannot be used for all daily needs
You cannot pay your milkman, servant, paper wala (newspaper guy), etc
by card.
3. Loss & Misuse
Once a card is lost you have to immediately report it and get the card
blocked to avoid misuse. Sometimes when you are not aware that you
lost the card.the chances of misuse is higher.
Mr. Dev, who was on a vacation returned home after 10 days.
He was not aware of his card (which he lost during the trip).
One fine day when he checked his bank account he found that
Rs.75,000 worth of purchases have been made on his credit
card. Too late. But this case is a little old.
Today lot of checks and balances have been put in place. For instance
for debit card the customer has to key in the PIN for offline purchases,
and additional passwords/authentication for online transactions. Even
then taking precautions is absolutely necessary.
4. Low Value Transactions
As discussed above already there are cases where small and medium
sized retailers dont accept cards for low value transactions (say less
than Rs.200 or other criteria). You may have noticed this even in case of
outlets like petrol bunks or restaurants.
5. Service Charges
In some cases the outlets charge additional service charges for cards.
So this can be another burden on your pocket.

6. Damage to Card
Sometimes the cards magnetic strip gets damaged or scratches or cuts
can render the card unusable. So keeping it safe and secure is very
important.
7. Carrying or Keeping the Card
Keeping the card and cash in the wallet together is like inviting trouble.
This is the way everyone (including me) used to carry cash and cards.
But this means once you lose your wallet you lose everything.
So here the card doesnt come to your rescue after losing cash. The best
practice is to keep cash and cards separately so that if you lose one you
have the other to bank upon.
By the way, nowadays I dont carry cards in my wallet. Its mostly in the
bag or sometimes in a different pocket. You can try this or other methods
but ensure that you dont keep everything in one place and lose it all.
Now that we have a clear idea of some of the drawbacks of credit and
debit cards lets also look at some key points on how to strike a balance
between use of cash, cards and control your spending habits.
8. Spending Habits & Other Tips
Whether you use cash or cards, having a control on your spending is
very important. A few pointers would be worth noting.
9. Impulsive Purchases
Dont yield to impulsive purchases. Try to see what real benefit or value
are you getting from the purchase. If you cant live without it you can
postpone or keep the spending on hold.
10. Peer Pressure
Its okay to spend some money on entertainment, outing, fine dining, etc.
once in a while (say once or twice a month).
But if you do it every week on instance of your friend, colleague, etc you
will have not savings every month end. Your future financial planning is
out of question if you live from pay cheque to pay cheque.

So its time to become smart and avoid unnecessary wasteful

expenditure. Sometimes you may have to attend a few parties,
dinner/lunch activities, etc but prioritize and attend only the ones which
are important and add value to you. For others you can say sorry and
avoid or try to finish it over a simple coffee.
11. Overuse of Cards
I find that people who are finding cards as a convenient medium try to
use it everywhere left, right and center. Further, they have 3-4 cards
which are used one after the other at different places. I would advice
them to have fewer transactions so that it is easier to keep a check on
the transactions every month and easier to pay the bill as well.
12. Special Offers, Discounts
Some people have this fancy and think that they are smart when they
get special discounts on cards at retail outlets.
Ha ha ha ha What a joke! Do you think the card company and the
retail chains are so kind enough to serve you at a discount. They want
you to loosen your purse and spend more so that they can laugh all the
way to their bank.
13. Debt Trap
Overuse of credit cards and rolling over your balance is the shortest
route to bankruptcy. Remember that you have to pay your credit card in
full. If you know what this means in letter and spirit you will be careful
while spending on your credit card. The interest rate on credit card roll
over is as high as 3-4% every month which translates to 36%-48% every
year.
14. Cash Management (Running to ATM often)
Most people particularly those who started their careers in the last 3-4
years have been more used to cards than cash. They dont carry much
cash and dont keep cash at home too.
This is absolutely disastrous. When someone at home has a medical
emergency or has to buy groceries or do some major repairs cash in

hand is absolutely necessary. Ive seen people who often run to ATM
when they want to purchase some groceries.
Surprisingly some people dont even keep Rs.1000 at home when they
actually earn more than Rs.50,000 per month. This is just over
dependence on cards, which is foolish, because you still need cash for
most of your expenses.
Conclusion
Change is the only constant thing in life, accepting these changes and trying to
change with time is smartness. Technology is the smartest way of banking in
todays time. You save on a lot of time, money and efforts that you spent on by
going to the branch.
Banking online and plastic money both are safe these days, yes there are a few
unforeseen event in line with online transactions like hacking of bank accounts,
fraudulent transactions, miss placing of debit cards and many more, however
this has been taken care of by the regulators to make sure that such events
minimize and cause no harm to the consumer so that you continue to use
technology for your banking and other financial transactions.
Technology gives you almost all your banking options on your finger tips, these
banking options differ from bank to bank and the facilities available on their
websites. Besides making money and the bank available on your fingertips it
cuts down on the cost incurred by the regulator in printing and disposing
currency. You can help yourself, the government and the surrounding by
accepting this change and giving online banking a try.