What is Plastic Money - Meaning, Types & its benefits

10 MAY, 2024

Plastic money is a technological invention that enables transactions without physical cash expenditure. It can be defined as the currency stored in plastic cards, such as debit and credit cards, facilitating transactions without cash and encouraging online payments.

This article will dig deeper and explore the various aspects of plastic money, covering topics like plastic money meaning, definition, types of plastic money, benefits, and many other aspects, including its usage in India.

What is Plastic Money?

Here’s a little introduction to plastic money. Plastic money refers to payment methods executed through cards that are predominantly made of plastic with metal components. Credit cards and debit cards are the best examples of plastic money, which allow people to make electronic transactions with the availability of their financial information saved securely. The manufacturing or invention of these cards has been a fair replacement for physical money, which is cash. Plastic money also helps you with hassle-free transactions, unlike physical money. With plastic money, there is no constant need to visit your banks for your transactions or every time you want money and are cashless.

History of Plastic Money

Barclays in London introduced plastic money in 1967. In 1969, Chemical Banks in New York also initiated the use of plastic money. A significant development was the introduction of magnetic stripe cards. These cards contained specific numbers and details, allowing individuals to access their bank accounts and conduct transactions without physical cash.

Following the introduction of plastic money in 1967, a significant advancement occurred in 1973 with the introduction of a hardware security module, leveraging microprocessor technology for secure payments. This evolution led to the emergence of smart cards in the late 1970s, gaining popularity among users by the late 1980s.

Types of Plastic Money

ATM-cum-Debit Cards

ATM-cum-Debit cards are a kind of plastic money widely used and linked directly to your bank account. The specific thing about debit cards or ATM cards is that one can use them to withdraw money. Besides, using this card, one can make online payments by simply swiping it on card machines or tapping it at retail stores and other places like restaurants, shopping malls, and others. With ATM or debit card transactions, money is instantly debited from your account after you make any transactions, allowing you to enjoy the benefits of a liquid bank account.

Credit Cards

Credit cards are another kind of plastic money that enables you to enjoy credit card benefits and make transactions without spending money at the moment. A credit card, offered by leading banks like Kotak, usually comes with a pre-approved limit and a timeframe for payment. With credit cards, one can benefit from spending now and paying later. Getting into specific details, when you use a Kotak credit card, the bank pays to a retail store or market on your behalf. However, there is a bill generated for your credit expenditure, which you pay according to the deadline. Credit cards offer users the advantage of accessing credit with an approved spending limit and a specified time frame for repayment, providing flexibility and convenience in managing finances.

Prepaid Cards

It is one of the types of plastic money that enables you to have specific budget expenditures, ensuring you don't spend beyond that. Getting yourself a Kotak Mahindra Bank prepaid card is the best way to control your expenses and stick to your monthly budget plan. All you need to do with these kinds of cards is load or recharge them with a specific amount and spend accordingly. You can easily load your card with the desired funds by linking your bank account and visiting the card provider's website.

Forex Cards

Forex cards are mostly used by overseas travelers for international payments. With Forex cards, you can load more than one currency fund in your card, which has a validity of approximately five years. This allows you to avoid the currency exchange hassle and fill your Forex card with the desired amount and currency, especially while traveling. Besides being hassle-free, using a Forex card can save you from constant rate fluctuation, as the card will follow the rate at the time you purchased it.

Benefits of Plastic Money

Now that you know what plastic money means and the definition of plastic money, let’s look at the advantages of plastic money.

Convenience

One of the most important and foremost advantages of having plastic money is that it reduces the use of traditional payment modes and allows hassle-free payments. One can easily pay without having cash, simply with one swipe or tap.

Security

Another major advantage of plastic money is that it provides security. With the use of plastic money, there is no threat of money being stolen or lost. Unlike old-fashioned traditional money formats, using plastic money like debit card and credit card can save you from loss. If your card is lost or stolen, you can report it and block it. It also comes with a specific EVM number and chip, with double authentication for better security.

Record Keeping

You don’t need to keep a written record like you do with traditional money and expenditures. With plastic money, the issuing entity does the hard work for you. It keeps a detailed record of all your transactions, which can be easily available online using a specific password ID. You can allocate expenses and budget accordingly, ensuring efficient financial planning and management.

Global Acceptance

Using plastic money, including a Forex card, there is no geographical limitation. Unlike traditional cash, plastic money allows you to spend money anywhere in the world due to its global acceptance factor without worrying about currency exchange.

Emergency Access to Funds

Using plastic money, there is no worry about emergency access to funds, as you can make payments with simple swipes, not depending on your banks and withdrawals. In addition, the limit of online transactions is comparatively high and can easily be accessed with a specific pin.

Rewards and Benefits

With plastic payments, there are several benefits, given by credit card providers like Kotak Mahindra Bank. With swipe, returns, discounts, and other benefits are common, especially when you are doing online shopping.

What are the Drawbacks of Plastic Money?

Although there are several benefits to using plastic money, there are certain disadvantages, which should be considered. While the advantages are way higher than the disadvantages, users should consider them to make wise decisions and sensible payments.

The major drawback of plastic money is that it is not acceptable everywhere. For example, there are some shops and places where shopkeepers or the concerned person only accept cash.
In addition, with the benefits of plastic money, there is a higher chance that the person using these cards will end up spending more than planned.

Future of Plastic Money in India

In the past few years, India has witnessed a rise in online transactions and plastic money use. Considering India's rising economy, digital transactions have also leapt and increased drastically, making them a safer and more convenient option. Moreover, given the current rise in India's economic growth and digital payments, it is anticipated that India will witness more digital payments and the use of online payment with plastic money.