Playing Cards


Last week the RBI warned banks to check bad loans. This follows the downgrading of SBI by Moody’s, yet another interest rate hike and a caution by CRISIL on the impending slowdown. There was a special word of caution on credit cards .

Credit Cards in India are governed by the rule of 30. Coming into use exactly 30 years ago, credit cards have shown a 30% compounded annual growth. Both its number of users and even the type of cards have seen a surge. In a space dominated by foreign banks, Indian banks have managed only a 30% share of the market. What’s worse , the conservative PSU banks have issued only 30 lakh cards so far . Today, around just 30 million Indians ( 3% of our population ) have credit cards making it a huge business opportunity for the financial sector. Transactions through credit cards are slated to double from here to 30 billion dollars over the next  30 months  . Now, the question is whether it should or not?. Lets first understand this  flashy piece of plastic  before we mull over its pros and cons . 

So why credit cards ?. Best defined by the “c” word , they seek to replace currency by providing  convenience, credit and at times even  cost benefits .It however also lends to  callousness ,consumption, craving and contradiction .It creates a sense of confidence by enhancing capability and capacity and reducing controls  .Generation next would term it as ‘cool” even though its after affects could burn the pocket . While simplifying  payments it compounds interest making it the most expensive loan available. Sometimes small things can create big problems. Measuring about 2”x”3” the credit card is an apt  example 

Interestingly, credit cards are all about the “present”. It presents an opportunity to spend today and pay tomorrow.It also makes you buy presents which you may not be able to afford. Besides it makes you live for the present at the expense of the future. Also referred to as plastic money  , credit cards can be  compared to plastic surgery. Plastic surgery usually is a cover up job, whether done for cosmetic beautification or in the case of scars and injuries .It conceals more and reveals less. So is  plastic money which often conceals the real income of the user giving a  temporary boost to his spending power. At the cosmetic level, plastic surgery has become trendy as it enhances beauty allowing you to see what is not the  real thing . Plastic money similarly has become a trend that enhances status and allows one to feel what may not be for real. Both result the signing of what often is a fat cheque

India has clearly been bitten by the credit card consumerism bug . The infection has set in but needs a dose of antibiotic to prevent it from becoming an epidemic. That does’nt mean you discard the card . Just use it for convenience against a monthly budget. Do  carry the card but avoid carrying forward the credit. As mentioned its the costliest form of credit.You could land up paying more interest in a month  than what you earn in six . Use debit cards instead. Then the credit card points game is pointless. It just makes you spend more to get more only to  spend more. The ATM starts as a vending machine before becoming the spending machine. In these times of inflation and pay cuts Its better to be a miser than suffer misery.

 Lets imagine an India where only credit cards are  used – The toddler will be taught A for ATM , B for buy , C for CAT … P for PIN. the face of Gandhiji will become less familiar, the statutory ‘ ‘promise to pay the bearer the sum of ‘ will have no sanctity,  mint will only be referred to as a herb  , you shall be deprived of the pleasure of getting money returned at the store , with no cash shopkeepers won’t have to count – just account , toffees sales ( now having substituted change) will be hurt,  beggars will start carrying credit card swiping  machines even as pocket money will become obsolete.

 On the positive side ,It would  provide a check on unaccounted money . Bribes will become impossible , corruption will disappear, real estate will fall to its real value, money coming into the system could lower tax rates, enhance transparency and better public expenditure on infrastructure and social support.Plastic may remain eco unfriendly but not plastic money .

Coming up is  the festive season . Your credit card and mind will be put to  test. Spending and losing have the same effect on your pocket but different effects on your mind .The gambling month of Diwali is on. Remember the game of cards is more of a mind game . Avoid playing blind , keep your limits . Play your cards  well

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