With the cash crunch likely to continue, more and more people have started to use alternate methods of payment. For the still uninitiated, here is how you can go cashless to meet your daily spends:
A month after the government’s demonetization announcement, the RBI has been able to replace only around one-third of the Rs 15.5 lakh crore demonetized currency. With the cash crunch likely to continue, more and more people have started to use alternate methods of payment. For the still uninitiated, here is how you can go cashless to meet your daily spends:
Plastic Cards: The most popular mode of cashless payment, they come in three forms— credit card, debit card and prepaid cards. Debit cards are linked to your bank accounts and every cash withdrawal or purchase through it is directly charged to your bank account. Instead of standing in a queue and withdrawing cash from ATM/cash counters, use debit cards to directly charge your bank account against your purchases. They are extremely handy for regular payments like utility bill payments, groceries etc.
Credit cards also work on the same concept; the difference is that instead of charging your bank account, they finance your spends at zero cost, provided you pay your card bill by the due date. Failing to repay by due date attracts a late fee and hefty finance charges (25–46% p.a.). These are best utilized while making big ticket purchases, to earn maximum reward points.
Prepaid cards are similar to prepaid services. These are not attached to any bank account and have to be recharged before making any purchase.
If you have more than one plastic card, make sure to compare their reward point structures, like cashback offers and discounts before using them. For example, some debit/credit cards have big offers on purchase of air tickets, others offer cashback on grocery spends and utility bill payments.
Mobile-wallets (M-wallets): M-wallets have seen a huge surge in their popularity since the demonetization announcement. All you need to make purchases through your M-wallet is a smartphone. There are several M-wallet apps in India, which you can choose basis the offers and features they have on offer. Once you have an M-wallet app on your smartphone, you can either load it with money from your bank account or you can directly link your debit/credit card to it.
With mobile wallets, you can pay for flight tickets, utility bills, fuel purchases and grocery. Apart from the ease, M-wallets also come with attractive discounts and cash back offers.
NEFT/RTGS: NEFT and RTGS systems were introduced to provide a faster alternative to physical cheque clearing process. They are most useful for transferring funds from one bank account to another in quick time. However, these two systems are not 24*7*365. They only work for 8 to 10 hours on working days, and are not available on weekends (except 1st and 3rd Saturdays) and holidays and other bank holidays.
Although money transfer through the RTGS system is almost instant, it comes with a lower limit cap of Rs 2 lakh per transaction. In case of NEFT, there are no upper or lower limits on transaction but transfers can take up to 48 hours.
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Immediate Payment Service (IMPS): This is an instant 24*7 interbank payment service available on mobile phones, ATMs and Internet. For availing IMPS on your mobile phones, you need to register for mobile banking with your bank. All you need to do is type in your payee’s Mobile Money Identifier (MMID) number and mobile number and your payment will be done. However, the upper limit for IMPS is Rs 2 lakh per transaction.
Unified Payments Interface (UPI): UPI is a part of the government’s ambitious IndiaStack initiative. Unlike NEFT/RTGS, it is a 24*7 online payment system of sending/receiving money through your smartphone, where every payment or receipt is directly debited or credited to your bank account.
Currently, this platform is available on Android phones only. As of now, around 32 banks have joined the UPI system, most of which are offering it for free.
The UPI system is quite simple to use. Download an UPI app of your choice and set a virtual payment address (VPA) and a 6-digit mobile pin (MPIN). For transferring money, just type in the payee’s VPA and the amount to be transferred and the entire transaction is completed in less than a couple of minutes. The speed and convenience of this system make it highly suitable for use it for daily spends.
Apart from curbing black money and fake currency circulation, the government’s demonetization move also aims at speeding up the adoption of cashless payment systems. Several incentives have been announced by the government to encourage digital payments, like 0.75% discount on using your debit/credit card or M-wallet at petrol pumps. So, use cashless modes for purchases and transactions as much as you can. They not only bring convenience and save time, but are also easy to use. If your neighbourhood stores do not have a card-swiping machine, make them aware of the speed and convenience of UPI and M-wallets. The benefits might convince them to go digital, and save you from the hassle of withdrawing and paying in cash.
(The author is CEO & Co-founder, Paisabazaar.com)