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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, credit cards, ATMs, smart cards, etc.

MEANING
Plastic money is a term that is used predominantly in reference to the hard plastic cards we use every day in place of actual bank notes. They can come in many different forms such as cash cards, credit cards, debit cards, pre-paid cash cards and store cards

DEFINITION
Term plastic money Definition: A slang phrase for credit cards, especially when such cards used to make purchases. The "plastic" portion of this term refers to the plastic construction of credit cards, as opposed to paper and metal of currency. The "money" portion is an erroneous reference to credit cards as a form of money, which they are not. Although credit cards do facilitate transactions, because they are a liability rather than an asset, they are not money and not part of the economy's money supply.

THE HISTORY OF CREDIT CARDS AND DEBIT CARDS IN PLASTIC MONEY


Credit cards have evolved into a safe and secure manner to purchase goods and services. The internet has given credit card users additional purchasing power. Banks have option like cash-back rewards, savings plan and other incentives to

entice people to use their cards. Debit cards allow people the convenience of cards without the worry of racking up debt. The convenience, security and rewards offered by credit and debit cards keep shoppers using their cards as opposed to checks or cash.

CREDIT CARD ORIGINS The first credit cards were issued by individual stores and merchants. These cards were issued in limited locations and only accepted by the businesses that issued them. While the cards were convenient for the customers, they also provided a customer loyalty and customer service benefits, which was good for both customers and merchants. It was not until 1950 that the Dinners Club card was created by a restaurant patron who forgot his wallet and realized that, there was a need for an alternative to cash. This started the first credit card specifically for widespread use, even though it was primarily used for entertainment and travel expenses. PLASTIC BECOMES THE STANDARD The first Diners club cards were made out of cardboard or celluloid. In 1959 American Express changed all that with the first card made of plastic. American Express created a system of making an impression of the card presented at the register for payment. Then that impression was billed to the customer and due in full each month. Several American Express cards still operate like this as of 2010. It was not until the late 1980s that American Express began allowing people to pay their balances over time with additional card options. BANK CARD ASSOCIATIONS In 1966, Bank of America created a card that was a general purpose card or open loop card. These closed loop agreements limited cards like Diners Club and American Express to certain merchants, unlike the new open loop cards. These new general purpose system required inter-bank cooperation and additional regulations. This created additional safety features and began building the credit

system of today. Two system emerged as the leaders-VISA and MASTER CARD. However, today there is a little difference between the two and most merchants accept both card associations. DEBIT CARDS EMERGE The VISA association of cards took credit cards to a new level in 1989 when they introduced debit cards. These cards linked consumers to their checking accounts. Money was now drawn from a checking account at the point of sale with these new cards and replaced cheque writing. This helped the merchants check that money was available and made it easier to track the customer if the funds could not be obtained. Consumers liked the convenience of not having to write checks at the point of sale, which made debit cards a safe alternative to cash and cheques . THE FUTURE There were almost 29 million debit card users as of 2006, with a projected 34.4 million users by 2016. However, online services like PayPal are emerging as a way for people to pay their debts in new, secure and convenient ways. Technology also exists to have devices implanted into phones, keys and other everyday devices so that the ability to pay at the point of sale is even more convenient.

TYPES OF PLASTIC MONEY


1. CREDIT CARD A credit card is plastic money that is used to pay for products and services at over 20 million locations around the world. All you need to do is produce the card and sign a charge slip to pay for your purchases. The institution which issues the card makes the payment to the outlet on your behalf, you will pay this loan back to the institution at a later date.

2. DEBIT CARD Debit cards are substitutes for cash or cheque payments, much the same way that credit cards are. However, banks only issue them to you if you hold an account with them. When a debit card is used to make a payment, the total amount charged is instantly reduced from your bank balance. 3. CHARGE CARD A charge card carries all the features of credit cards. However, after using a charge card you will have to pay off the entire amount billed, by the due date. If you fail to do so, you are likely to be considered a defaulter and will usually have to pay up a steep late payment charge. When you use a credit card you are not declared a defaulter even if you miss your due date. A 2.95 per cent late payment fees (this differs from one bank to another) is levied in your next billing statement. 4. AMEX CARD Amex stands for AMERICAN EXPRESS and is one of the well known charge cards. This card has its own merchant establishment tie-ups and does not depend on the network of MASTERCARD or VISA. This card is typically meant for high-income group categories and companies and may not be acceptable at many outlets. There are a wide variety of special privileges offered to Amex cardholders. 5. DINNER CLUB CARD Diners Club is a branded charge card. There are a wide variety of special privileges offered to the Diners Club cardholder. For instance, as a cardholder you can set your own spending limit. Besides, the card has its own merchant establishment tie-ups and does not depend on the network of MASTERCARD or VISA. However, since this card is typically meant for high-income group categories, it may not be acceptable at many outlets. It would be a good idea to check whether a member establishment does accept the card or not in advance.

6. GLOBAL CARDS Global cards allow you the flexibility and convenience of using a credit card rather than cash or travelers cheque while traveling abroad for either business or personal. 7. CO-BRANDED CARD Co-branded cards are credit cards issued by card companies that have tied up with a popular brand for the purpose of offering certain exclusive benefits. For example, the Citi-Times card gives you all the benefits of a Citibank credit card along with a special discount on Times Music cassettes, free entry to Times Music events, etc. 8. MASTERCARD & VISA MASTERCARD & VISA are global non-profit organizations dedicated to promote the growth of the card business across the world. They have built a vast network of merchant establishments so that customers worldwide may use their respective credit cards to make various payments. 9. SMART CARDS A smart card contains an electronic chip which is used to store cash. This is most useful when you have to pay for small purchases, for example bus fares and coffee. No identification, signature or payment authorization is required for using this card. The exact amount of purchase is deducted from the smart card during payment and is collected by smart card reading machines. No change is given. Currently this product is available only in very developed countries like the USA and is being used only sporadically in India.