Credit cards & Debit cards

Plastic Money is the term used to indicate Credit cards & Debit cards. Before the advent of Credit cards and Debit cards a major portion of the business transactions were carried on through cash. Even though there existed a very strong banking industry the business was more dependent on cash transactions than the banking channel due to the lack of information with regard to the credit worthiness o the customers and the inherent delay in collections. This posed a major problem for both the business community as well as the individuals.

The plight of the travellers was still worse; they were forced to carry large quantities of cash wherever they went. Carrying cash in itself was a great threat than anything else. Thanks to the development in technology and computerisation, with the use of the smart cards like Credit cards & Debit a is the need to carry cash is significant! reduced. You can shop whenever you want and you can make the payment instantly either with a Credit card or a Debit card.

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Since the cash is replaced by plastic cards (whether Credit card or Debit card) it is called plastic money. The plastic money brings with it various advantages like availing a credit facility whenever you want and paying for your purchases or making other utility payments without actually exchanging money or visiting the bank. Now a day's plastic money in the form of cards taking place of currency at present there are at least three million cards in use with estimated annual billing, Rs.

5000 crores. No one can deny the importance and advantages of credit cards. If we ask people whether credit cards are a necessity or a luxury and most would probably term them a necessity these days. Credit cards are considered a boon for the ready convenience they confer on the user- you don't have to worry about carrying enough cash when you go shopping or to a restaurant.

Just flash your card, sign and walk out. Thus the age of plastic money has finally come to India. The credit card has become a matter of status. There are various categories of credit cards. The category, we are assigned, depends on our annual income and frequency of usage. Generally it is seen the more exclusive our card category, the higher is the value of services offered. Annex Gold Card holders are offered privileges that range from the highest insurance cover to no present spending limit. Special corporate cards for frequent travellers and other catagories are also"available. Credit Card does not mean 'free' credit. In effect, what we are doing is merely postponing payment, while it looks real good to have to pay only one or two thousand a month on our card, it should not be forgotten that we are paying interest on the amount that we 'revolve' from one billing cycle to the next. But there is one precaution we should add. We should always settle a credit card in full for two good reasons. First and foremost, if we are not able to pay up now, we should not have spent it in the first place. Second, the credit charges tend to be extremely high, ranging from 2 percent to 3 percent per month. There is no shortage of cards on offer. Almost every bank has launched a card, so the biggest hurdle we face is in trying to choose from amongst them. So, how does one choose among the various cards on offer? The factors for choosing a card revolve around certain differentiating features that one card may offer and the others don't, like acceptability, eligibility, fees, other charges, credit period, cash advance etc.

Cards which carry the Master or Visa affiliation are more widely accepted across the country compared to Diners and American Express cards. Similarly, global credit cards are valid even outside India. If one travels regularly within or outside India, these cards would probably suit one the best, due to their acceptability across various outlets If our credit card is more of a functional accessory while we shop or entertain in our own town, we will want a higher credit limit. Here foreign and private banks will give us a higher limit. But if we are value-for-money persons who like the convenience offered by a card, but will alternate between paying by cash and card, we could consider credit cards offered by the public sector banks. These entry fees are typically lower. Moreover, if we need them, we get longer credit periods and lower credit changes. But we may not yet a very high credit limit many of us now days carry more than one card, and under the circumstances, we could use them to segregate our expenses. It is said that many people fall into a debt trap. But if we are careful with our expenses, credit cards can be handy thing to have around. Hence, we need to consider the term 'responsible usage' and understand the actual significance of living on credit. If we use the cards carelessly we will really fall into a debt trap. Now it is upto us how we use them. We must not forget that credit card is a boon if we handle it with care but a bane in absense of our sensibility.