By Sanderson Abel
Financial innovation is fast changing the way we deal with money giving us more convenience and easy access to funds from anywhere.
It all started with a simple credit card that allowed you to make purchases today and pay later. Further, technological advancements led to a new trend where most banks issued ATM cards or debit cards which can be used for withdrawing money as well as for making purchases or payments either offline or online.
Plastic money is a term that predominantly refers to the hard plastic cards, that we use every day, in place of bank notes or coins.
It is the generic term for all types which come in many different forms, such as cash cards, credit cards, debit cards, pre-paid cash cards and store cards. These cards are often referred to as “plastic money” because they facilitate transactions and make it possible to purchase goods when currency are not available. In Zimbabwe, we generally call these cards ATM cards because of their predominant use for making withdrawals at Automated Teller Machines. What are the advantages of using plastic money?
Eliminates the need for carrying huge amounts of cash. This eliminates the need for carrying huge load of cash which is risky and inconvenient too. Credit and debit cards offer no-hassle shopping. There is usually no need for cash, no additional credit checks, and sometimes no additional identification requirements as the user is normally required to insert their Personalised Identity Number. This then increases the convenience of the cardholder in undertaking his shopping.
There is the added convenience in that you don’t need to first go to the bank or to an ATM to withdraw cash before doing your shopping.
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.
There is flexibility associated with the plastic money. For example, you may be in a supermarket and realise that there is something worth buying that is on sale, which is about to come to an end. Having a credit or debit card on you allows you to make necessary and economical to purchase the item quickly and easily. A credit card will help you make the purchase even if you don’t have adequate money on your person as you can use your credit limit.
Anytime and anywhere access using cards you have the unique advantage and convenience of using it anywhere in the country or even abroad. 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
There is no better measure of your creditworthiness than how you handle a credit card. When lenders want proof of your credit worthy-ness, they consult your credit history for a black-and-white snapshot of your ability to repay.
You can use cards for online payments, fund transfers and various other transactions. In the current globalised economy, purchases across the globe can be made through mail, telephone or via the Internet. These purchases can only be possible through the use of credit cards. Credit or debit cards make it easier to book a hotel or make a reservation for car rental or paying for your air tickets over the internet.
Despite the advantages that are associated with the use of plastic money, it is important to understand that there are also some disadvantages which are associated with the same.
Plastic money gives cardholders an easy and extended purchasing capacity, which can result in an extra and unwanted buying. These cards can sometimes encourage owners to get them and use their hard earned money for non-essential things, negatively affecting budgets. Customers need to take care not to end up in difficult financial situations.
Credits cards can be costly to use as they cost much more than other forms of credit, such as personal loans. The transaction charges are also usually added to the credit amount, which can make the eventual repayments much more than you would have anticipated.
Credit cards can be stolen. In today’s technical world it is possible from criminal elements to get a clone of any credit card or debit card, which works like the original and these can give you a heavy financial loss. Customers need to observe the advice given by their bankers to avoid such losses.
However, it is important to note that the advantages of using plastic money far outweigh the disadvantages.
Hence it is essential to embrace the plastic money for your convenience. Talk to your banker on how you can acquire a plastic card today.
Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe.
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