Zimbabweans have in recent years developed a culture of carrying hard cash and using it for most transactions — large and small. Whether one is buying groceries for $50 or paying for a car worth $10 000, there is a huge bias for using cash in our daily dealings. This is in spite of there being so many alternative platforms available for the banking public to avoid queuing in banking halls or carrying large amounts of cash on their persons. After all, moving around with loads of cash in itself poses a high personal security risk to people. Indeed, there are several risks of using hard cash or carrying large sums of cash on one’s person, such as the risk of losing the cash, dropping your wallet or purse, or even getting mugged. Dealing in a cash economy also imposes other hidden costs, besides the high risk of loss, in the intervening period before that cash finds its way back into the bank. Plastic money offers a safe, convenient and low-cost way to transact on a day-to-day basis.
By Clive Mphambela
What are the various types of plastic money? The generic term “plastic money” predominantly refers to the plastic bank cards that are issued to account holders for their every day use, in place of hard cash (bank notes or coins) or cheques. In Zimbabwe, we generally call these plastic cards “ATM cards” because of their predominant use for making withdrawals at Automated Teller Machines (ATMs). How can bank customers benefit from plastic money?
Debit cards These are the most common types of cards issued to every bank customer when they open an account. These cards are usually given free of charge or at a very nominal charge. Debit cards do not have a loan facility tied to them, but will directly debit money from your bank account when they are used to purchase goods and services. The card is simply linked to a customer’s available credit bank account balance. Using a debit card, a customer cannot transact beyond balance that is marked as “available” on their account. They are normally linked to a savings account and in some cases, where a customer has an overdraft facility, the card will also allow transactions to the extent of the overdraft limit.
Credit cards This card permits the card holder to withdraw cash from an ATM or purchase goods and services directly from stores that accept the type of card up to the card’s “credit limit”. The money withdrawn from this type of card is basically a form of short-term loan to the card holder. Most credit card facilities carry no direct interest charge for the amount “borrowed” but a fee is payable to the bank for accessing the facility. Interest normally becomes due after a certain cut off date provided the balance is still outstanding on the credit card. The card holder can avoid any interest charges by paying the balance off in full each month before this date.
Pre-paid cash cards These are a form of debit card, except that they may not be linked to a bank account, but for example, be linked to a mobile banking wallet. As the name suggests, the user will upload a cash credit balance to the card either by themselves at an ATM, through a bank or other authorised agents, and expenditures or withdrawals from the card will not exceed the amount stored on the card. All the details about the customer and the amounts and details of transactions are stored on a magnetic strip or micro-chip on the card. These are usually re-useable in that they can be “topped up”. Typical issuers of such cards are banks and large stores.
Benefits of using plastic money:
Ready convenience Credit and debit cards offer hassle-free shopping. There is usually no need for carrying cash, no additional credit checks, although additional identification particulars are usually required in addition to the private personalised identity number (PIN). This increases the security of funds and limits the use of the card to its rightful owner, although it is sometimes viewed as a small inconvenience of the cardholder in undertaking his shopping. There is, however, great convenience in that customers don’t need to first go to the bank or to an ATM to withdraw cash before doing their shopping.
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Widespread access through the Zimswitch network The Zimswitch network comprises 16-member banks, which have deployed over 4 000 Zimswitch enabled point of sale devices nationwide in all the major regional and local retail outlets. In addition, there are close to 400 Zimswitch compliant ATMs, some of which are located in remote areas so that banking services are within the reach of many people.
Security Cash carries a big risk of loss. One can easily drop a wallet and once it is lost, it is usually lost forever. On the other hand, if you lose your credit or debit card and quickly report it to your bank, the unauthorised use of your card will be stopped quickly without any loss.
Flexibility There is flexibility associated with using plastic money. Plastic cards give access to ones money at many different access points such as point of sale machines and also at any time of the day. The bank does not need to be open, and one can access their money sometimes even when they are away from the home country, if the card is issued for international use.
Reputation and status Sometimes a credit card can be a measure of your credit worthiness. It can tell a story about how you handle your finances. Are there any risks associated with using plastic money? Despite the many advantages that are associated with the use of plastic money, it is important to understand that there are also some risks that must be mitigated.
Over extension Plastic money, especially credit cards may give cardholders an easy and extended purchasing capacity, which can result in an extra and unwarranted spending and impulse buying. Thus, credit cards can easily sometimes encourage owners to spend money on non-essential things, negatively affecting their budgets. Customers, therefore, need to take care not to end up in financial difficulty due to abuse of ready credit.
High cost of interest Credits cards can be costly to use, as the money costs much more than other forms of credit, such as personal loans. Transaction charges are also usually added to the credit amount, which can make the eventual repayments much more than you would have anticipated.
Card theft and fraud Credit and debit cards can be stolen. In today’s world it is possible for criminal elements to even clone your credit card or debit card, in such a manner that it would work as an original card. It is, therefore, important for one to keep identity particulars, PINs and the card separate at all times. When a card is lost, customers must immediately alert the bank so that the card is blocked from unauthorised usage, which can lead to financial loss.
It is, however, important for banking customers to appreciate that the advantages of using plastic money far outweigh the few disadvantages noted above. Plastic money can therefore be used to good effect and the convenience of the banking public.
