Plastic Money - An Introduction

Plastic money or polymer money, made out of plastic, is a new and easier way of paying for goods and
services. Plastic money was introduced in the 1950s and is now an essential form of ready money which
reduces the risk of handling a huge amount of cash. It includes debit cards, ATMs, smart cards, etc. Credit
cards, variants of plastic money, are used as substitutes for currency. This book on plastic money is
divided into two sections titled Concepts and Experiences. The former covers articles on the the
emergence of plastic money, different types of plastic cards and their growth in India and other related
issues. Experiences discusses the experiences of banks like Standard Chartered, Citibank, which deal with
plastic money and their growth in the market.

Plastic money are the alternative to the cash or the standard 'money'. Plastic money is used to refer to the
credit cards or the debit cards that we use to make purchases in our everyday life.  Plastic money is much
more convenient to carry around as you do not have to carry a huge some of money with you. It is also
much safer to carry it along or to travel with it as if it is stolen one can consult the bank whose service
you are using and get it blocked hence saving your money from getting stolen or even lost.
Nowadays even developing countries like India are encouraging the use of these plastic money more than
cash due to these reasons. Furtermore these credit and debit cards also have plastic used in their making
and that is where the name 'platic money' has originated from

ADVANTGES OF PLASTIC
MONEY:-
1. Offer free use of funds, provided you
always pay your balance in full, on time.
2. Be more convenient to carry than cash.
3. Help you establish a good credit history.
4. Provide a convenient payment method
for purchases made on the Internet and
over the telephone.
5. Give you incentives, such as reward
points, that you can redeem.

DISADVANTAGES OF
PLASTIC MONEY:-
•
1. Cost much more than other forms of
credit, such as a line of credit or a
personal loan, if you don't pay on time.
2. Damage your credit rating if your
payments are late;
3. Allow you to build up more debt than
you can handle;
4. Have complicated terms and conditions

TYPES OF PLASTIC MONEY

Cash card

Credit card
•Debit card
•Charge card
•Master card & Visa
•Smart card
•Dinner club card
•Photo card
•Global card
•Co-branded card

Plastic cards

Plastic cards can be extremely useful, but some types can also let you run up large debts and
interest charges if they are not used wisely.

There are many types of plastic cards and they all have different functions:

Cash Cards

A cash card allows you to withdraw up to around $500 per day from ATMs 24 hours a day, seven days a
week (provided they don’t run out of money and you have money in your account).

Reloadable ‘electronic cash’ cards with a stored-value (also known as stored-value cards or SVCs) are
being introduced in Australia.

Debit Cards

Most cash cards are also debit cards – known in Australia as Electronic Funds Transfer at Point Of Sale
(EFTPOS) cards – which are accepted by most retailers and mail-order businesses in Australia and have
largely replaced cheques. Over half of all card transactions in Australia are made with debit cards.
There’s no limit to the amount you can pay with a debit card, but you must have the money in your
account (or have an authorised overdraft). Many retailers, e.g. supermarkets, allow customers to obtain
cash (known as ‘cash-back’) when they’re buying goods with a debit card. Many cards can also be used
overseas, e.g. Visa or MasterCard ‘EFTPOS’ cards, to obtain cash and buy goods and services, although
there’s a charge for obtaining cash.
Credit & Charge Cards

The most commonly accepted credit cards in Australia are Bankcard (Australia’s own credit card
organisation), MasterCard and Visa (and affiliates). Most outlets that accept Bankcard also accept
MasterCard and Visa. American Express, Carte Blanche and Diners Club charge cards are also widely
accepted. All banks, building societies and many credit unions and major retailers, including most
department and chain stores, offer their own credit cards in Australia; some stores don’t accept any cards
other than their own. Interest rates on store cards are usually very high, e.g. up to double what you pay
with Visa or MasterCard. It isn’t always necessary to have an account with a financial institution to obtain
a credit card.

The main difference between the two types of card is that with a charge card you can defer paying the bill
for a few weeks or months but must pay the total balance outstanding when it’s due (otherwise a penalty
is payable), whereas a credit card allows you to defer payment for an indefinite period provided you repay
a minimum amount (usually around 2 to 3 per cent of the outstanding balance) each month and don’t
exceed your credit limit.

Cash card

This lets you get cash from cash machines by using a PIN (personal identity number). Your PIN should
be kept secret; if you lose it or it is stolen, inform your bank immediately. If someone else withdraws cash
with your card and PIN before you report it, you may have to pay for any amount that they took out.

Keeping your card separate from your PIN reduces the risk of someone else being able to use it. Many
cash cards will work in lots of different machines, so you don't have to use the machines for your bank.
Your bank will be able tell you which cash machines you can use.

With the introduction of CashCard in Nov 1996, there are more than one million cards in circulation in
Singapore. With the introduction of Electronic Road Pricing (ERP), it is expected that this number will
increase. Currently CashCard is accepted in all major retail outlets and more outlets will soon have their
terminals converted to accept it as well.

CashCard is based on the Smart card technology. This technology offers superior security and ease of
use. CashCard offers the same convenience as dollar notes and coins, in fact CashCard is an exact
replacement of these notes and coins.

In July 1998, all NTU students and staff have been issued with a smart card (in place of the normal
Student or Staff Card) which is also a CashCard.

 
Debit card (e.g. Maestro)

This card allows you to buy things without writing a cheque or carrying cash. You can also use it to buy
things over the telephone or on the internet. It's just like using an "electronic cheque". When you use it,
the amount of your purchase is "debited to" (taken from) your account, usually two or three days later.
Your bank statement will often show which supplier you bought the goods from.

Some companies, such as supermarkets, will let you have cash from the till, known as "cash-back", as
well as pay for goods.

Most debit cards are also cash cards.

A debit card (also known as a bank card or check card) is a plastic card that provides an alternative
payment method to cash when making purchases. Functionally, it can be called an electronic check, as the
funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In
some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card. [1][2]

In many countries the use of debit cards has become so widespread that their volume of use has overtaken
or entirely replaced the check and, in some instances, cash transactions. Like credit cards, debit cards are
used widely for telephone and Internet purchases and, unlike credit cards, the funds are transferred
immediately from the bearer's bank account instead of having the bearer pay back the money at a later
date.

Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash
and as a check guarantee card. Merchants may also offer cashback facilities to customers, where a
customer can withdraw cash along with their purchase.

Credit card (e.g. Visa, Mastercard)

Like a debit card, a credit card allows you to buy goods and services from a huge range of shops and
other suppliers, including over the telephone or on the internet.

The difference between a credit card and a debit card is that a credit card lets you pay for things now, but
you don't get the bill until later.

The firm issuing you with the credit card is lending you money to buy things. They may charge a yearly
fee for the card. When you open your credit card account, you will be told of your 'limit' (how much you
can borrow). If you go over this limit, your card may be taken away from you.

Each month your credit card company will send you a statement, showing what you have spent using the
card. It will also tell you how much you owe them and by what date you need to make a payment.

You have the choice of paying the bill in full, or paying part only. If you pay off only part of the
outstanding balance, interest is usually charged on the whole balance, before deducting the payment.
Not paying off the full amount of your credit card is a very expensive way of borrowing. If you can, you
should try to pay the whole of the bill each month - or at least as much as you can afford.

Whenever you make a purchase today with the promise to pay for it tomorrow, you are using credit.
Having credit lets you make purchases when you don’t have cash available. Before a lender will allow
you to use credit, it must first believe that you can be trusted to repay the amount of credit you use. This
is considered financial trustworthiness.

Lenders use a number of factors to determine your financial trustworthiness. The most commonly used
factor is your credit history. How you have used credit in the past – your credit history – is considered to
be the best way to predict how you will use it in the future. Your credit history is reported in your credit
report and credit score.

When you are a new creditor and do not have a credit history, the lender might use other factors such as
employment and salary to gauge your financial trustworthiness. Or, the lender might require that someone
who does have favorable credit agree to repay your charges if you fail to do so. In this case, the two of
you share credit.

How Does It Work?

To establish credit with a financial institution, you must first make an application. The lender will use
identifying information, like your social security number, to look up your credit history. If the lender
determines that you are a trustworthy borrower, then it will extend credit to you.

Once you have been approved for credit, the lender will give you guidelines, or terms, for using your
credit. The terms include, but are not limited to, how often you should send payments for purchases, what
happens if you are late on a payment, and the cost of using credit.

Usually, the lender establishes a maximum amount of credit that you can use, a credit limit, based on your
credit history. Your credit terms will outline what happens if you exceed this limit. In most cases, there is
a monetary penalty.

When you’ve been approved for credit, the lender provides you with a way to use this

credit, e.g. a credit card. Periodically you will receive a billing statement from your lender detailing
purchases you’ve made, interest charged, minimum payment amount due, and payment due date. Per your
agreement with the lender, you must make payments by the due date to avoid penalties.
What's the difference between a Debit Card, Credit Card and Charge Card?

 A debit card takes the amount of the transaction from your bank account on the day of purchase.
 A credit card is effectively a borrowing facility. You are given a credit limit and can borrow up to
that amount by spending on your card. It is however often an expensive way to borrow money.
If you pay your card off in full each month then you will not (or should not) incur any finance
charges.
 A charge card must be repaid in full each month. Barclays launched the first charge card carrying
the VISA symbol, and soon launched Barclaycard. Today's most famous charge card brand is
American Express, although they now offer a range of credit cards too. Charge cards often
carry an annual fee.

MasterCard

MasterCard Worldwide (NYSE: MA) is an American multinational corporation with its headquarters in

the MasterCard International Global Headquarters in Purchase, Harrison, New York. Throughout the
world, its principal business is to process payments between the banks of merchants and the card issuing
banks or credit unions of the purchasers who use the "MasterCard" brand debit and credit cards to make
purchases. MasterCard Worldwide has been a publicly traded company since 2006. Prior to its initial
public offering, MasterCard Worldwide was a membership organization owned by the 25,000+ financial
institutions that issue its card.

MasterCard, originally known as MasterCharge, was created by several California banks as a competitor
to the BankAmericard issued by Bank of America, which later became the Visa credit card issued by Visa
Inc. The original banks behind MasterCharge were United California Bank (later First Interstate Bank and
subsequently merged into Wells Fargo Bank), Wells Fargo, Crocker National Bank (also subsequently
merged into Wells Fargo), and the Bank of California (subsequently merged into the Union Bank of
California).

The two leading credit card companies in the world today are the competitors Visa and MasterCard. They
both operate along very similar lines. While Visa can claim to have almost a billion cards issued,
MasterCard has over twenty five thousand banks issuing its cards and it is difficult to find any difference
in the number of locations worldwide that accept the cards, which is now estimated at over twenty
million.

In fact, as far as most consumers are concerned, there is no real difference between the two. They are
both very widely accepted in over one hundred and fifty countries and it is very rare to find a location that
will accept one but not the other.

However, neither Visa nor MasterCard actually issue any credit cards themselves. They are both simply
methods of payment. They rely on banks in various countries to issue credit cards that utilise these
payment methods. Therefore, the interest rates, rewards, annual fees, and all other charges are issued by
your bank and when you pay your bill you are paying it to the bank or institution that issued your card
and not Visa or MasterCard.

How Visa and MasterCard make their money is by charging the retailer for using their payment method.
So the truth of the matter is that a Visa issued by say the Bank of New York will have very little to do
with a Visa issued by other banks and may in fact by more similar to the Bank of New York’s
MasterCard.

What this means for the vast majority of customers is that you do not have to overly concern yourself
with whether a credit card is MasterCard or Visa. You would be better off concentrating on the interest
and other charges on the card, the balance transfer possibilities or their reward scheme. You are very
unlikely to ever be effected by the fact that it is one and not the other.

If you prefer, if you are going to have two credit cards, you may decide that you want one of them to be
Visa and the other MasterCard, this means that if something drastic were to happen to one company, or if
you were in the unlikely position of finding a location that accepts one but not the other, then you would
have the option of paying with either.

At the end of the day however, much more depends on the bank that gave you the card, than on the type
of card it is.

MasterCard is one of the major credit cards used regularly by people in the United States, second only in
name recognition and worldwide billings to Visa. By marketing itself to ordinary men and women, in
contrast to Visa's efforts to capture an upper-income clientele, MasterCard is slowly chipping away at
Visa's market share in both the United States and other areas around the globe.

In 1951, the Franklin National Bank (presently European American Bank) issued the first modern credit
card, which was accepted by local merchants. Within a short period of time over 100 additional banks
started issuing cards. Cardholders paid their bills upon receipt, and no fee or interest was charged.
Merchants were charged a fee by the issuing bank for any transaction made on the card. Because these
cards could only be used within a limited geographical region, customer volume was low and the banks'
profits minimal.

Smart card

Smart cards in the wireless marketplace provide: improved network security through user identification, a
facility for storing user data, and a mechanism for recording various service data events. These
capabilities enable improved service customization and portability in a secure environment, especially
suited for various transaction based services.Smart cards are tamper resistant and utilize ISO-standardized
Application Protocol Data Units (APDU) to communicate with host devices via PIN codes and
cryptographic keys.

This paper provides an overview of various smart card technologies and business issues.

Smart cards are the youngest members of the plastic card family. A Smart Card is defined as:

“A plastic card, usually similar in size and shape to a credit card, containing a microprocessor and
memory (which allows it to store and process data) and complying with ISO 7816 standard”

In layman’s term a smart card can be defined as a card with a very tiny computer embedded in it.

Though they can be classified on basis of various parameters, we shall discuss the classification on basis
of Card Components, Card Interface and Smart Card OS only in this article.

Cheque guarantee card

Some shops or services will only accept a current account cheque if you have one of these cards.

Can cards be used abroad?

Debit and credit cards can usually be used abroad as a more convenient and low-cost alternative to
foreign cash and travellers cheques.

How secure is my card?

Every transaction made with a credit card can be traced. This means that it's often easy to prove if a
payment was made by someone else without your knowledge.The company who issued the card will pay
back any money that was stolen in this way, provided you let them know of the problem as soon as you
discover it.

Online Shopping

Online Shopping can be an easy way of people to steal your details. Only ever buy using a secure
computer network and from reputable company with a secure online purchasing service.

What if I lose my card?

If you lose a card or cheque book, immediately notify the bank, building society or other organisation
which issued it to you.They can often be contacted 24 hours a day. Keeping your cheque book and
guarantee card separate makes it harder for someone else to use them.