Can Credit Cards be called Money?
“Credit cards are the visible form of a pact between you and the credit card company. Money factor comes into picture at the time of repayment of the borrowed money.”
All of us use credit cards but have we ever pondered over the question regarding their inclusion in the term money? If not, let’s try to understand what all is considered as money and what is the status of credit cards in this respect.
According to standards accepted in various countries different kinds of checks, deposits, accounts, mutual funds, balances, repurchase liabilities etc. are considered to be diverse forms of money.
But such standards or definitions don’t regard credit cards to be an ingredient of the money supply chain. Why after all is this so? Let’s take an example to fathom the reason.
Suppose, you want to buy a DVD player and you don’t have the requisite money for it. You go to your friend tell him to pay the price of the DVD player (say 100 bucks). You promise your friend that you would pay him the amount later. Your friend agrees to this and pays 100 bucks to the shopkeeper.
At best we can say that you have taken a credit of 100 bucks from your friend but this credit cannot be called money. Firstly, it is because your friend cannot use this credit (even if you have given an undertaking regarding the repayment of 100 bucks to him on a legal document) to purchase things for him. He will have to spend his ‘real’ money if he wishes to do so.
Nor can he convince someone to give him money by giving this legal document as guarantee (under all practical cases). So, we can say that this pact, obligation or contract that you have brought about cannot be considered money from today till the time you repay 100 bucks.
The same thing applies to credit cards. You make the credit card companies pay for you with the assurance that you would pay the amount at the time of issuing of the credit card bill. Credit cards are the visible form of this kind of pact only.
As a result, this pact between you and the company cannot be called money. Money factor comes into picture when you pay back your credit card bill.
Author - DeeKay
Tags - Finance, Economy
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