Debit and credit cards (Plastic money) usage increasing day by day and now banking companies also promoting its usage among the people especially middle and upper class of the society. How one can take benefit by using plastic money efficiently? What are the various ways to get the maximum benefit and at the same time avoid ugly circumstances caused by using plastic money?
In the past 10 years banking and finance industry saw a radical change as far as innovation and IT usage is concerned. Remembering the days when there were long lines in the banks to withdraw money from your a/c. Now with the invention of plastic money like ATM cum debit cards made it easy to withdraw money from your a/c at any point of time. Plastic money is the alternative to the cash or standard money. Plastic money is refers to the credit cards and debit cards that use to carry for purchasing, shopping and paying bills. It is more convenient to carry plastic money instead of carrying standard money and it is safe too. Innovation in the form of plastic money change the finance and banking sector scenario. You can also carry loans in the form of credit cards and you have to pay interest as per your usage. It was never easy to carry bulk money with you while traveling and shopping. Now plastic money made it easy to pay your bills and payments without carrying paper money.
Efficient use of cards:
It is important to use plastic money judiciously. Any instrument is for our benefit and certain advantage if used efficiently. Plastic money is like a knife. We use knife to cut vegetables and fruits into equal pieces and also to save energy. It needs care and patience to use knife but a little mistake or hastiness may result into hand injury. In the same way credit cards needed proper management and planning to get benefit. Some advantages keeping credit cards are:
Convenience: A Credit and debit card allows you to purchase or shop without carrying paper money. You can pay the bills with the help of plastic money and also reduce the burden of keeping money with you.
Antitheft: To keep huge sum of money during shopping or purchasing is risky. To reduce the risk of money theft plastic money is the best option. It is much safer to carry while traveling and in case of stolen one can consult with the concerned bank whose services you are using and get it blocked immediately to protect your money from getting stolen.
Financial tool: Clever use of credit cards in purchasing and paying bills can be a good financial tool to manage finances. Monthly bill can be used to track the various expenses done in a month on various items. Various credit card companies provide customized services in the form of sending a percentage and category wise quarterly, half yearly or annual statement summary of your spending on different products and services.
To beat fake: Use of plastic money also protects from the fake currencies. Today fake currencies in India are a big problem. To avoid the use of fake currencies, plastic money can be a better tool than using paper money.
Consequences of ugly credit or debt management:
Using credit card is risk of getting into debt if not used cleverly. Credit card is a useful invention which allows us to purchase almost everything without carrying cash. Problems start when people started credit card for over purchasing without any concern of repayment of credit card bill in the end of month. Some basic problems arise due to ugly debt management and lacks of awareness are:
Read all the information and instructions carefully in the credit card statement and brochure about the use of credit cards.
Interest is charged if payment is not done in full.
Interest is having a compounding effect. It means if you are having Rs. 1000 outstanding balance with interest rate of 2% per month, then the balance for the next month will be Rs. 1020, then Rs. 1040.40, then 1061.21 and so on. At the end of the one year total balance will be Rs. 1268.24.
Credit card is free: There is no service provided by any company is free. Only for the first year all the credits card companies do not charge anything but from the second year onwards they charged some amount as an annual maintenance fee from the user.
Late payment fee: Always pay on time and pay in full if there is minimum payment option is given. Company will charge on the balance money.
Offers on credit card: Do not go for any insurance premium offer provided by the company over the telephone. They directly debit the amount from your credit card and if you are unable to pay the bill amount again compounding interest rate charged on your balance.
Debit cards & Indian banking industry:
Indian banking industry promoting debit cards very aggressively after current economic fall down which results into lack of liquidity in market. Banks are getting more cautious in issuing credit cards to its customers due to default customers. Recent data shows that banks are concentrating on debit cards due to its equal usability as credit cards in shopping, online purchasing and bill payments and no worry of default customers. Indian banks charging minimum amount of money ranges from 100 Rs. to 150 Rs. as an annual maintenance from customers for debit card facility. Banks are getting business and also no bad effects on the liquidity in the market. There are some points why Indian banks promoting debit cards:
High delinquency of credit cards and loss borne by banks due to loan defaulters.
A safer source of income for banks.
Debit cards works as a credit card except credit facility which reduces risk of non payment of bill.
Huge potential in the market.
Cash is for good and credit is for bad.
Way to reduce worry:
Use of plastic money is for reducing the worry of carrying cash not to increase the problems caused due to unawareness about its usage. For credit card holders it is important to use it as a facility of short term limited finance not to use it as an overflow of money to spend on less important items. Credit cards users have to use it very effectively to manage their monthly budget by rotating money wisely. As far as debit card holder and its usage are concerned they have to keep sufficient balance in their a/c to use it as plastic money cum debit instrument.