The Curse of Plastic Money

Let’s start this post by defining what plastic money is. It’s pure and simply hard plastic cards used for money transactions; in this case credit cards. In this modern era of consumerism, credit cards have become one of our most beloved companions. But there is a huge down side to the use of credit cards and no! This post is not about how people can steal your personal information.
During the financial crisis everyone was focused on how the banking system had made bad investment and that is why we are in this mess. Even after a few years into the mess, nobody had given a serious enough thought into how the plastic money had a part to play in it as well. So let me explain what exactly is wrong with the extended use of credit cards.
As we all know credits cards are a system of shopping in which the payment for the purchase of a particular object is postponed and yet the object can be purchased. This is a type of small term loan guarantee without the messy paperwork. What happens now is the complicated part. As soon as the store keeper wipes the credit card on the machine, the computer shows an amount of sum has been transferred to the store’s account. But the reality is, no real money has exchanged hands nor has the banks transferred any cash into the store’s account. Only on paper (not paper money) has this transaction taken place. When the time comes for the shop to pay the supplier, he also pays using this same credit system without actual transfer of hard money. So again the transaction is verifiable only on paper. This supplier then has to pay the producer as well; who also gets the money on paper, without money actually exchanging hands. So here we are creating a cycle of debt which is being transferred from the customer, to the supplier, to the producer. This keeps on going until a bubble bursts. And that is exactly what happened. Although the bubble had burst in the mortgage market, which was also in its own cycle of debt; the ripples did not end with that one market alone.
This cycle of debt is what causes heavy loss to the banking industry. But no one really speaks about it because, on paper this is profit. Because when we look at the computer screen the money is there. But try looking at it again after someone has defaulted on the payment, or something like the financial crisis comes along. The money will be nowhere to be found. This is why credits cards should be used only sparingly. Carry some hard cash around. It is good for you, because you will not be in debt and you can also keep track of your debt payment. A debit card is also a good option, because here actual transfer on money takes place.

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4 thoughts on “The Curse of Plastic Money”

    1. tighter regulation on this industry is the only way we can prevent another catastrophe. the banking industry is hugely corrupt.

      1. I agree absolutely, but am pessimistic about the liklihood of that happening in any meaningful way. Speaking for the UK, I know that the banking industry employs professional lobbyists to press their case in parliament. When you discover that many past and present government ministers hold non-executive directorships with major banks you can really appreciate the scale of the problem.

        best wishes

        Jim

      2. yes that is true. sometimes it feels like there is nothing that can be done. but we cannot give up. because it feels like a revolution is coming and maybe things might change for the better or maybe for the worse. i hope its for the better. people need to start protesting for the right reasons. they should protest for the separation of state and private entities. i hope i will see that day.

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