Saturday, October 23, 2010, AM | 5 Comments
People living in developing countries don’t have the luxury of using credit cards. Credit (loan) is available though and is given to consumers and small businesses only after the banks do a thorough check up on the financial well-being of borrowers. We all know banks are in existence because they want to make profit in almost all transactions they make. Loan is given to no one unless banks make sure the borrowers would be able to pay it back.
One survey shows that 85 percent of the world’s transactions are still in cash. India, China and Brazil are three of the biggest upcoming countries with huge populations. Imagine all Chinese, Indians and Brazilians using credit cards like we do here in the U.S. The foreclosures and bankruptcies there would be many (I mean many many) times over what we have experienced the last few years in the U.S.
Theirs is what I call blessing in disguise. The lack of credit card usage has turned into a blessing from heaven for literally billions of hard-working folks. That does not mean credit in the form of loan is not available to them. It sure is. Plus people in developing countries are a lot more conservative with money. The saving rate among the middle class is quite high.
Ajay Banga, the newly minted chief executive of MasterCard (MC), wants to change the cash to a charge payment in India of 1.2 billion people. If even 5% of the total population use credit cards regularly, I think that would be enough for the issuing companies to turn those transactions into big profits. Banga was born, raised and educated in India. From the outset, it seems MC would have an upper hand even though its competitor Visa is many times bigger. Visa can have a bigger share mainly because of its “bigness.”
O! People of India…
When you do have to use credit cards, use them wisely. The money is not yours. You just borrow it or more appropriately rent it for short period of time. Don’t follow the Western folks especially Americans with some possessing 10 cards. They are in deep shit, better known as debt.
Media reports show that Mr. Banga has declared a “war on cash” to nudge as many consumers as possible toward electronic payments, preferably processed by MasterCard.
In a Nutshell
Remember to not get into deep debt because of credit cards usage. Be smart and use the cards wisely to your advantage and not to fill the pockets of the card issuing companies.