Why too much plastic money is bad for your wallet

“God doesn't give everything to everyone,” she said as soon as she entered my room with a view, overlooking the bus depot. 

“God?”

“Yes. I can see you are listening to Joan Baez singing songs written by Bob Dylan.” 

“Yes.”

“So, God gave Dylan the ability to write, but not the ability to sing,” she said. 

“And he gave Baez the ability to sing?” I asked.

“Yes, you are right.” 

“They would have made a lovely band together. Baez and Dylan, like Simon and Garfunkel.”

“You and your imagination V.”

“Yes,” I replied. “What's that envelope sticking out of your purse?”

“Oh, that's a new credit card that I have got.” 

“But why?” I asked. “Don't you have six credit cards already?” 

“Yes, but the rewards points on this card are much better.” 

“Okay. So why don't you give up a couple of other cards now that you have this.” 

“Oh, V. The process of returning a credit card is quite painful.” 

“So? You should have thought of that before taking all these cards and not now.” 

“Hmmm.” 

“Also, how do you keep track of so many cards? I mean, how much is due on each card and by when does it have to be paid so as not to attract any interest?” 

“Oh, don't worry about that. I have made a proper excel sheet and I keep track of it.”

“But still, why not limit yourself to three or four cards and be happy with that?”

“V, you know, you have a habit of taking away all the small pleasures in life.”

“As in?”

“I just like the idea of having six cards in my wallet. Whenever I open my wallet and see all these cards in it, it is comforting for me. It makes me happy.” 

“That must be a first. Feeling happy by just looking at cards.”

“Don't be sarcastic,” she said. 

“So, you know how cards hurt?” 

“I definitely know how they help. I don't have to carry any cash around.” 

“Well, actually, you should always carry some cash around and use it to buy things.”

“Why is that?”

“Simply because you will feel the pain of spending when you spend actual cash. That simply doesn't happen when you spend using a card.” 

“So?”

“When you don't feel the pain of spending, the tendency is to go overboard while spending.” 

“Hmmm.”

“Any shop that offers you the facility to pay by card shares some part of the value of the transaction with the bank whose card has been used and with the bank whose swiping machine has been used.”

“Yes.”

“Basically, whenever a customer pays by card, the shop does not make as much money as it does when the customer pays cash.” 

“That seems to be a logical conclusion.”

“But even then the shop is fine letting customers use a card and does not insist on cash.”

“Now that you put it that way…”

“Why is that the case?” I asked. 

“Hmmm. I don't know. You tell me.”

“Basically, whenever people use a card, they shop more. Because the average transaction on a card is much bigger in comparison to an average cash transaction, the owner of the shop more than makes up for what he loses out in terms of a commission he has to pay to the banks.”

“Hmmm.”

“Of course, the average transaction on cards is bigger not just because there is less pain of spending but also because it is convenient. When you want to buy something like a TV or a washing machine or a computer, it just makes so much more sense to use a card than carry cash around.” 

“Yes.”

“At the same time, it makes sense to keep spending some cash as well and not completely move on to plastic. It is important to keep feeling the pain of spending, here and there, now and then.” 

“Thanks V, for all the gyaan,” she said. “Now let's listen to Baez and Dylan.” 

(The example is hypothetical.) 

Vivek Kaul is the author of the Easy Money trilogy.