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Learning how to go cashless in the wake of demonetisation- A tale of an ordinary Indian

  Tue, Dec 06, 2016     written by : CSF-Team


Case Study - On the evening of November 8th, Manpreet Kaur, a Mumbai based homemaker had settled in front of the TV to have her dinner after she had put her toddler to bed. Like always, she decided to browse some news channels before switching to her favourite daily soap. Only this time she remained fixated on the TV screen as she watched the Prime Minister declaring notes of Rs 500 and1000 illegal tender.

Her first reaction was that of panic, as her husband had just left for a business tour for three weeks and had left Rs 25,000 for her in cash to take care of household expenses while he was gone. In a state of shock and panic she had forgotten all about the secured credit card that her husband left with her, one she had barely used before. As her husband was on board an international flight for the next 16 hours, she called up her friend and neighbour Fatema, who is a financial consultant by profession.

On receiving an SOS call from her friend, Fatema rushed down to her apartment and saw Manpreet sitting with a blank expression. The first thing Fatema did was to calm her down and assure her that her wad of cash would not be rendered useless as she could deposit the old notes into her bank account till December 31st 2016. Manpreet asked Fatema how she was to go about with her day to day life without cash. Fatema asked if she had a credit card. That is when Manpreet remembered the credit card that she hardly ever used. Manpreet was wary of using a credit card because she had heard that usage of a credit card could lead to bad credit.

Fatema calmed her down that the usage of a credit card need to necessarily lead to bad credit if one were to be careful with its usage. And even then, there are several bad credit fix ideas that one could work upon. In fact, she told Manpreet that one could even avail of bad credit personal loans when in dire straits. She said she had personally come across clients who could avail of a personal loan for low CIBIL score, but that was a different story for a different day! For now she focussed on what Manpreet could use her credit card for:

  • Shopping- Whether it was buying groceries online or at the local kirana store, or buying anything from diapers for her kid to fashion jewellery that she had a penchant for, she could carry out any transaction of any value on her low interest credit card. Not just online retailers but local kirana stores have point of sale terminals, that have now made it easier for anyone and everyone to make a card transaction.
  • Payment of utility bills- Manpreet expressed concern about the payment of utility bills and data recharge of her phone and DTH to which Fatema replied that credit cards were very efficient on that count too.
  • Making cab bookings- Manpreet visited her relatives and friends in central Mumbai at least twice a month for which she took a radio taxi from her home in Malad, a western Mumbai suburb. But thus far, she had only paid by cash when she availed of such cab service. Fatema explained that she could use her credit card to top up the e-wallets that each of the cab services provided. This would ensure that each transaction would be cashless and hassle free.
  • Booking movie tickets- Manpreet is a big movie buff like Fatema and together they try to make it to a film every other week. Fatema told her that this time they could watch their favourite filmstar Shah Rukh Khan's movie Dear Zindagi by booking the tickets for the same on the movie ticketing app with her credit card. Fatema also told Manpreet that since she would be using her credit card for the first time on the app, she would also be eligible for a discount.
  • Paying school fees- Manpreet was worried about the fact that she had to pay the second term fee at the playschool that her son attended. Fatema assured her that they too accepted payments by cheque/credit card. Her daughter attended the same playschool a year ago, and Fatema had made a card payment even then.

Manpreet followed Fatema's advice to the T and found that using her credit card had indeed made her life a lot simpler and lighter. She also learned that by using her credit card she could:

  • Get additional discounts almost everywhere which led to additional savings
  • Earn reward points and cashbacks
  • Build a good credit history
  • Keep better account of the expenses by tracking credit card statements
  • Get access to interest free money for a stipulated period if she ensured that each credit card bill was paid in full within each billing cycle.

Fatema had also thrown in a word of caution about credit card usage. She said that while a credit card is synonymous with convenience and can be used to enhance one's credit score, it may also turn into a potential debt trap if used recklessly. She reminded Manpreet that the first and foremost rule of credit card usage was that each outstanding bill must be repaid in full within each billing cycle. That was the one and only way to build and enhance CIBIL score.

Armed with this new-found knowledge and confidence, Manpreet has literally been leading a cashless life for nearly a month now. In the past week, she also left her son with Fatema and went and stood in queue to deposit her cash. While Manpreet is not very sure about the long term impact of demonetisation and cannot comprehend what it will mean for the economy a few months or years down the line, she is certainly happy and positive about the fact, that demonetisation has compelled her to go cashless that in turn makes her feel empowered and more confident today.