FINANCIAL INSTITUTION OF

INVESTMENT MANAGEMENT

UNIT-4 (F-2)

(BY- Reena Sharma)

WHAT IS A LEASE?

 A lease is a contract outlining the terms under which

one party agrees to rent an asset—in this case,
property—owned by another party.
 It guarantees the lessee, also known as the tenant,
use of the property and guarantees the lessor (the
property owner or landlord) regular payments for a
specified period in exchange.
 Both the lessee and the lessor face consequences if
they fail to uphold the terms of the contract.
 A lease is a form of incorporeal right.
 KEY TAKEAWAYS
 A lease is a legal, binding contract outlining the terms
under which one party agrees to rent property owned by
another party.
 It guarantees the tenant or lessee use of the property and
guarantees the property owner or landlord regular
payments for a specified period in exchange.
 Residential leases tend to be the same for all tenants, but
there are several different types of commercial leases.
 Consequences for breaking leases range from mild to
damaging, depending on the circumstances under which
they are broken.
 Certain protected groups are able to vacate their leases
without any consequences, for which some form of proof is
usually required.
PARTIES INVOLVED IN THE LEASE CONTRACT
 1. Lessor: Lessor is the holder or the owner of the
property or land to be leased. It can be an individual
or any legal entity.
2.Lessee: The person who is taking the property or
land in a lease by paying money for a certain period is
termed as lessee. Any person or entity who is in need
of property or land can be a lessee.
DIFFERENCE BETWEEN LEASE AND RENT
ADVANTAGES OF LEASE
 Following are the advantages of the lease:
 1. Rate of interest is fixed: The rate of interest throughout the lease
period remains the same as decided during the time of signing the
agreement with the mutual consent of the lessor and the lessee. Thus, the
lessee need not worry about the rise in the rate of interest.
 2. Tax benefits: Both lessor and lessee get benefited by the leasing facility.
The lessor can claim depreciation in books; on the other hand, lease rentals
can be claimed as an expense by the lessee.
3. Low initial investment: For the new set-ups leasing is an excellent
option with low initial cost and expenditure on the purchase of assets.
4. Effective use of the company’s capital: Company can use their capital
fund for increasing their other investments rather than investing in asset
purchasing. Leasing becomes a better option than purchasing fixed assets;
the company need not spend bulk amount together.
5. Convenience: Buying assets for the business will create an unnecessary
burden and increase the company’s cost. Thus, leasing becomes the most
convenient way of acquiring required fixed assets for the business without
investing money in bulk.
6. Time saver: The lessee can get immediate possession of the asset after
signing the lease contract and do not have to wait for the bank’s or financial
institution’s approval for the loan to buy an asset.
7. No asset obsolescence burden: The lessee does not have to take a
burden of the charge of asset obsolesces because of any technological
advancements or changes as it is the liability of the lessor to change the
obsolete assets, the lessee’s only liability here is to pay a rent for using such
asset.
DISADVANTAGES OF LEASE
 Following are the disadvantages of lease:
 1. No ownership: Lessee doesn’t have the holding rights or ownership over
the asset after the expiry of the lease agreement, i.e., the lessor has a right to
lease its asset to another company or sell an asset after the lease period.
2. Maintenance of the assets: In case of the financial lease, the lessee
enjoys the right of ownership on the asset till the date of the expiry of the
lease agreement. Along with that, the lessee has to bear the burden of
maintaining and repairing such assets till it is in their possession.
3. Lease expenses: The company has to make regular lease payments to the
lessor for using their asset irrespective of the profits or losses earned, such
expense is treated as a lease expense in the books of the lessee.
4. Penalty on lease termination: If in case lessee failed to complete lease
term or violates any clause mentioned in the contract due to any reason he
has to face heavy penalties for breach of contract.
5. Higher cost: However, leasing an asset does not put a one-time burden on
the lessee. It may cost higher in the long-run as the lessor may charge a high
amount as rent for recovering the asset’s cost plus his profit.
6. Restrictions on use of equipment: Lessor may impose some conditions
regarding the use of assets at the time of lease and lessee is liable to follow
those restrictions while using such assets.
7. No benefits of value appreciation: No matter the value of the asset
increases during the period of the lease, the lessor won’t get any benefit from
the price rise of the asset, the lessee will only pay the rental amount as
mentioned in the lease agreement.
8. Double Taxation: Sales tax may be imposed twice once at a time of
purchase of assets and twice at a time of leasing of an asset.
WHAT ARE THE VARIOUS TYPES OF LEASE

 Types of Leasing
 There are numerous sorts of leases, such as finance leases,
operating leases, leveraged & non-leveraged leases,
conveyance categories, import and international leases,
and so on. Below listed are different types of leases.
 (1) Finance lease :
 Finance lease is a lease in which the lessor passes nearly
all the risks & benefits of asset holding to the lessee in
exchange for lease rents. In other terms, it places the
lessee in a similar position as if they have bought the asset.
Finance leases are divided into two stages: The first is the
primary phase. This is a non-cancellable period during
which the lessor recoups his entire investment via lease
rental. The main phase might last an unlimited amount of
time. The lease rental during the second term is
significantly lower than that for the introductory period.
 Features of Finance Lease
 The features are as follows:
 The lessee picks the required asset, usually equipment, vehicles, software, etc.
 The lessor funds the purchases of the asset and leases it to the lessee.
 The lessee utilizes the asset during the course of the lease, during which the lessee pays
series of installments to the lessor for the asset.
 At the expiry of the lease, the lessee is offered the option to acquire ownership of the
asset by paying a bullet payment, which is usually a bargain price.
 Finance lease characteristics include:5
 Ownership: Transfers to the lessee at the end of the lease term.
 Bargain purchase options: Enables the lessee to buy an asset at less than fair
market value.
 Terms: Equals or exceeds 75% of the asset's estimated useful life.
 Present value: PV of lease payments equals or exceeds 90% of the asset's original cost.
 Risks/benefits: All risk is transferred to the lessee.
 EXAMPLE In order to understand finance lease in a better way, let’s go through an
example. Suppose there are two people, A and B. Person A purchased a new car, and
after some days, B asks him to rent the car for five year (finance lease). The terms of the
finance lease will be something like this:
 The term will be decided as the useful life span of the asset, say five years,
 Then the rental amount will be decided, and all the risk/profit will belong to person B.
(In this case, the damages, insurance, etc.)
 Person B pays the rental amount, and at the end of the lease period, he can simply pay
a balloon payment and keep the vehicle.
(2) OPERATING LEASE :
 What Is an Operating Lease?

 An operating lease is a contract that allows for an asset's use but does not
convey ownership rights of the asset. These leases allow businesses to use the
asset without incurring the high expenses involved in purchasing it.
 The business that leases the asset is called the lessee, and the business that
loans it under a lease is called the lessor. The responsibilities of each party in
the agreement are spelled out in the lease contract and documents, but
generally, the lessee must maintain the asset to ensure it remains in
operational condition, less any normal wear and tear.
 KEY TAKEAWAYS
 An operating lease is a contract that permits the use of an asset without
transferring the ownership rights of said asset.
 A finance lease is a contract that permits the use of an asset and transfers
ownership after the lease period is complete, and the lessor meets all other
contract obligations.
 GAAP rules govern accounting for operating leases.
 All leases 12 months and longer must be recognized on the balance sheet.
 Leases shorter than 12 months can be recognized as expenses using the
straight-line method.
ADVANTAGES AND DISADVANTAGES OF AN
OPERATING LEASE
 Advantages Explained
 No ownership: Not owning an asset can be beneficial because you won't
have to pay for repairs or maintenance.
 Renting may be cheaper: Renting is generally much more affordable than
purchasing, benefitting smaller or newer businesses that don't yet have the
financial strength to collect expensive assets.
 Short-term: You'll only need to lease the asset for as long as you need it,
reducing the overall costs of purchasing, maintaining, and selling it if you no
longer need it.
 Disadvantages Explained
 No equity: When you lease, you don't gain any equity
 Financing costs: You might incur financing costs with a lease, such as
interest
 Might pay more than market value: Depending on how long an asset is
leased, the total cost could be more than the market value at the time the
lease originated.
 Continuous terms renegotiation: Many leases are short-term. This means
the lessor and lessee will renegotiate terms every time the lease expires. This
provides the lessor an opportunity to raise rates or fees
EXAMPLE OF AN OPERATING LEASE

 A restaurant needs power to ensure it can operate

during outages and not have food spoil when
refrigeration systems are offline. Power keeps a
restaurant from losing business and costly supplies.
 A restaurant owner should ensure they have a
generator for this reason, but they might need a much
bigger and more expensive one. They'll need to power
freezers, refrigerators, ovens, heating lamps, lights, air
conditioning, water heaters, computer systems, and
more. Large generators can cost tens of thousands of
dollars, so the owner might choose to lease one.
 The owner would make rental payments to an
equipment rental service and account for it as an asset
and a liability on their balance sheet because they'll
likely need it for more than one year.
FINANCIAL LEASE AND OPERATING LEASE – KEY
DIFFERENCES
 (3) Sale and lease back :
 In a sale and leaseback transaction, one party (the seller-lessee) sells an
asset it owns to another party (the buyer-lessor) and simultaneously leases
back all or a portion of the same asset for all, or part of, the asset’s
remaining economic life. The seller-lessee transfers legal ownership of the
asset to the buyer-lessor in exchange for consideration, and then makes
periodic rental payments to the buyer-lessor to retain the use of the asset.
 Sale and leaseback transactions occur in a number of situations and are
economically attractive for seller-lessees as they can be used to:
 Generate cash flows
 Effectively refinance at a lower rate due to the transfer of tax ownership
and related tax benefits
 Reduce exposure to the risks of owning assets
 Result in less financing reflected on the balance sheet than under a
traditional mortgage
 Provide temporary transition space to a seller-lessee that is relocating to a
new property
 (4) Direct lease :
 It is a contract in which a lessor purchases new asset from the
manufacturer and leases it to the lessee. It may involve 3 or 2 parties.
 (5) Single investor lease :
 It is a lease in which the lessor funds the entire investment by an
appropriate mix of debt and equity funds. The debts raised by the
lessor to finance the asset are without recourse to the lessee, that is,
in the case of default in servicing the debt by the leasing company,
the lender is not entitled to payment from the lessee.
 (6) Leveraged lease :
 Under this lease, there are three parties involved; the Lessor, the
lender and the lessee. Under the leverage lease, the Lessor acts as
equity participant supplying a small portion of the total cost of the
assets while the lender supplies the major part. In this the lessor
has no risk on the finance the lender gave. And the lessee’s
payments go to the lender who takes the leased asset on default and
lender holds the title of asset.
 (7) Domestic Lease :
 If all the parties in the lease i.e, Lessor, lessee, lender belong to
same country then it is called as domestic lease.
 (8) International lease :
 A lease in which the parties are domiciled from different countries
is called as international lease.
HOW TO TERMINATE LEASE AGREEMENT EARLY?
 When in a rental agreement, there may come a time where you will have
to break the lease or simply terminate it. There could be several reasons
attached to it. If you are a landlord then you might just want to get rid of
the tenants as they are hard to live with or you are offered an amazing
deal on the sale of your property. If you are a tenant, you might choose to
leave early because you switched your job or the house is unhygienic and
inhabitable now. Whichever the case maybe, you have certain options for
termination of lease. Here is a brief guide for you to terminate lease
agreement early amicably.
 If you are a landlord
 To be on the safer side, landlords usually add the termination clause in
the lease agreement. Have a look at it and act accordingly. Often the
landlord has to give a month’s period to the tenant to vacate the
property premises. If you haven’t added the clause in your agreement
then you might have to come to consensus with your tenant and ask
them to vacate the premises. Here are a few reasons I feel might seem
valid to the tenant to vacate the property.
 You want to sell the property
 You want to renovate or reconstruct the property
 Your tenant has not been paying regular rent
 If you are a tenant
 As a tenant, you too have the right to vacate the property.
You can check the lease agreement and check for the
termination clause. You may have to serve a notice to your
landlord and inform them of your intentions. Apart from
this, if you have not entered into such an agreement, you can
explain the situation to your landlord. Here are a few
reasons which will help you with the early termination of
lease agreement.
 You are switching jobs hence need a new place to stay
 The property is unsafe and uninhabitable
 Landlord is intrusive
 I hope this should help you understand how to terminate
lease agreement early.
HIRE PURCHASE
 Hire Purchase Meaning
 Hire purchase is a buying option where the buyer pays for goods in
regular installments. But, first, the buyer has to pay a down
payment. The buyer does not get the title of ownership until complete
payment is made. This includes the principal and the interest.
 Due to the interest, buyers end up paying more. In many countries,
this mode of payment is also called the installment plan. A hire
vendor is a seller or business entity that offers this mode of purchase
to its customers.
 Key Takeaways
 Hire purchase is a legally binding agreement. A buyer or hirer
disburses a percentage of the total cash price as a down payment.
The buyer settles the outstanding sum and interest in periodic
installments.
 These transactions can also be executed with the help of a financier.
The financier purchases the goods on the buyer’s behalf and makes
payment to the seller. The financier presents the product to the buyer
and collects the amount with interest.
 It is a feasible buying option for low-income groups. Even expensive
products can be purchased conveniently. Also, industries facing cash
shortages do not want to spend a huge amount at once.
HIRE PURCHASE EXPLAINED

 Hire purchase is an installment-based method of procuring expensive consumer

goods or assets. This method is used both by individuals and firms. The buyer
makes a down payment—a partial sum or a percentage of the total price. The
remaining amount is paid in installments—inclusive of interest.
 The purchaser pays a rent (hiring charge) for an agreed period. The frequency of
installments could be yearly, quarterly, or monthly.
 The buyer can acquire goods immediately, but the ownership of goods remains
with the seller till the final payment is completed. If the buyer defaults, the seller
has the right to seize assets. Also, the seller can claim depreciation on sold
goods and avail tax benefits. Similarly, the purchaser can claim income tax
benefits on hire charges.
 The following parties are involved in a hire agreement:
 Hire Purchaser/Hirer: An Individual or organization purchases goods by paying
installments.
 Seller/Dealer: A business entity that sells goods.
 Financier: A finance company funds the purchase.
HIRE PURCHASE FEATURES

 The following characteristics differentiate it from other

modes of purchase:
 The buyer acquires the goods immediately—as soon as the
purchase is made.
 The ownership title of the goods or asset remains with the
seller or the financier—till the buyer makes the final
payment.
 After the down payment, the buyer pays for the remnant
with interest—in periodic installments.
 When buyers complete payment, the ownership title is
transferred to their name.
 A flat rate interest (interest is calculated on the full loan
amount for the entire period) is applied on these purchases.
 If the buyer defaults, the hire vendor can (legally) take
possession of the asset. Also, the buyer’s deposit is treated
as a fee for using the asset.
 TYPES OF HIRE PURCHASE
 There are two types of Hire Purchase, Consumer Hire Purchase and
Industrial Hire Purchase.
 Consumer Hire Purchase
 In this type, the goods are hired by the buyer for non-business
purposes i.e. for his personal use. The buyer does not intend to use the
hired goods for business purposes. Such agreements are not made by
any business institutions or companies. People generally enter such
contracts with their friends or acquaintances
 Example
 Mr. Sen. and Mr. Gupta are friends, Mr. Gupta is planning to sell his
car for $50,000, Mr. Sen wishes to purchase the car for his personal
use. However, he doesn’t have $50,000 in his hands, so, he entered
into an agreement with Mr. Gupta that he will make the down payment
of $5,000 initially and the balance of $45,000 will be paid in 5 equal
installments of $9,000 each month with 10% interest charged on
balance. In case, Mr. Gupta fails to pay any instalments then the car
will be taken back by Mr. Sen. The ownership of the car will be
transferred only after payment of the last installment.
 Industrial Hire Purchase
 Contrary to the above, under industrial hire purchase,
business organizations/companies hire an asset from
financial institutions for business purposes. The asset
acquired under such agreements is used solely for
business transactions.
 Example

 ABC Ltd. needs industrial equipment costing $70,000.

Due to a shortage of funds, it decides to enter into a hire
purchase agreement with XYZ Ltd., whereby ABC
acquires the equipment by paying $10,000 and agrees to
pay the balance $60,000 in 6 equal installments of
$10,000 each a month with an interest rate equaling 5%
per annum.
HIRE PURCHASE CALCULATION
 For determining the purchase price, the following formulas are
used:

 Here,
 Cash Price is the current market price at which goods can be
purchased.
 Hire Purchase Price is the price at which goods can be purchased
(as mentioned in the agreement).
 Annuity to recover $1 over the given period is given by:

 Here,
 r is the rate of interest.
 n is the number of installments.
 EXAMPLE
 on January 1, 2018. an Inc. purchased a machine on hire purchase from Z Ltd.
Inc. paid 80,000 immediately and agreed to three annual installments of
80,000 each. The installments will be paid on December 31 of every year.
 The machine’s purchase price is 298,000. If the vendor charges 5% interest
per annum, calculate the purchase price, total interest, and the breakup of
principal and interest paid by the buyer.
 Solution:
 Interest expenses can be calculated as follows:
 #3 – Principal and Interest Paid Every Year
1. The outstanding cash price at the time of the first installment is computed as
follows:
 Total Purchase Price – Down Payment = 298,000 – 80,000 = 218,000
 First Installment:
• Interest charged on the first installment:
 Interest = 5% of Outstanding cash price = 5% of 218,000 = 10,900
• The principal amount paid in the first installment:
 First Installment – Interest Paid = 80,000 – 10,900 = 69,100
• Outstanding amount after the first installment
 Total Outstanding Amount – Principal amount paid in first installment = 218,000 –
69,100 = 148,900
 Second Installment:
• Interest paid on second installment
 Interest = 5% of Outstanding amount = 5% of 148,900 = 7,445
• Principal Repaid in Second Installment
 Second Installment – Interest = 80,000 – 7,445 = 72,555
• Outstanding amount after the second installment
 Total Outstanding Amount – Principal amount paid in second installment = 148,900
– 72,555 = 76,345
 Third Installment:
• Interest paid in the Third Installment
 Interest = 5% of Outstanding amount = 5% of 76,345 = 3,655
ADVANTAGES AND DISADVANTAGES
 This mode of purchase has the following benefits:
• It is a feasible buying option for low-income groups.
• Industries facing cash shortages do not want to spend a huge amount
at once.
• Since the number and amount of periodic payments are known in
advance, it becomes easier for the entity to make budgeting decisions.
• It is not influenced by the buyer’s credit rating, which makes it suitable
even for customers with a poor credit score.
 This mode of purchase has the following drawbacks:
• Such a purchase imposes a fixed payment burden on the buyer, which
is difficult to arrange during a cash crunch.
• The interest charged on such a purchase increases the final cost of
goods.
• Even after making a significant part of the payment, the ownership of
goods or assets lies with the seller or financier.
• If the purchased asset gets stolen or destroyed before it is fully paid
for, insurance may not cover the liability.
• Some financiers charge exorbitant interest rates.
TERMINATION OF HIRE PURCHASE AGREEMENTS
 The circumstances listed below are grounds for termination of any type of hire purchase
agreement.
• The terms of the written contract
 The agreement states the various scenarios where both parties can discontinue the
agreement. Most contracts mention the return of the asset by the buyer, the seller’s notice
of termination in case of breach of terms and conditions, and the hirer’s notice of
termination of the contract as the legal circumstances permitting termination.
• Renewal of the agreement
 Both parties negotiate a new contract and terminate the initial credit agreement.
• Notice of termination
 Either the buyer or seller can give a notice requesting the termination of the hire purchase
agreement.
• Full repayment
 The agreement is considered null and void once the buyer settles their debt.
• Release of one party from the agreement
 The seller may release the hirer from the contract on various grounds. These reasons may
be the full repayment or breach of contract.
• Time-lapse
 The buyer is given a period to pay for the asset in full but fails to.
• Frustration
 The terms and conditions stipulated in the agreement are not met because of some act or
event. The contract is discontinued, and both parties are released from the obligations of
the hire purchase agreement.
CONSUMER CREDIT

 Consumer credit is personal debt taken on to purchase goods

and services. A credit card is one form of consumer credit.
 Although any type of personal loan could be labeled consumer
credit, the term is more often used to describe unsecured debt
that is taken on to buy everyday goods and services. However,
consumer debt can also include collateralized consumer loans
like mortgage and car loans.
 Understanding Consumer Credit
 In simple words, consumer credit is the term used to define an
unsecured debt that was taken to purchase goods and services.
However, debts taken for the purchase of a plot or house are not
included under consumer credit.
 Consumer credits are generally offered by financial institutions or
banks to help customers buy everyday goods and services at any
instant. In return, the consumers are charged interest over the time
taken to repay the debt.
CLASSIFICATION OF CONSUMER CREDIT
 Consumer credit can be classified into two types—Revolving credit and
Instalment credit.
 *Revolving Credit: * It is also referred to as the revolving line of credit. It
offers customers an open line of credit, which can be utilised to deplete
the maximum limit offered by the lender repeatedly.
 Consumers will be required to repay the minimum prescribed payments
regularly to keep the line of credit open. However, since the revolving
credit is an unsecured debt, it generally attracts a comparatively higher
rate of interest.
 The remaining debt after making the minimum payments will attract
interest with every month the line of credit is available.
 Instalment Credit: This type of credit is generally issued in the case of
specific purposes. They can be the purchase of furniture, vehicle,
or home appliances, among others.
 In the case of instalment credit, the payments are made in the form of
equated monthly instalments for a predefined period. Unlike the revolving
credit, instalment credit attracts a lower rate of interest as it is a secured
debt. Here, the goods purchased serves as collateral if the consumer
defaults on repayment.
 Advantages of Consumer Credit
 Consumer credit allows consumers to get an advance on
income to buy products and services. In an emergency, such as
a car breakdown, that can be a lifesaver. Because credit cards
are relatively safe to carry, America is increasingly becoming a
cashless society in which people routinely rely on credit for
purchases large and small.
 Revolving consumer credit is a highly lucrative industry. Banks
and financial institutions, department stores, and many other
businesses offer consumer credit.
 Disadvantages of Consumer Credit
 The main disadvantage of using revolving consumer credit is the
cost to consumers who fail to pay off their entire balances every
month and continue to accrue additional interest charges from
month to month. The average annual percentage rate on all
credit cards was 14.75% at the end of Q1 2021 according to
the Federal Reserve. A single late payment can boost the
cardholder's interest rate even higher.
PLASTIC MONEY
 In the past few decades, there has been a revolution in how we pay for
goods and services. Plastic money, also known as credit and debit cards,
has become many consumers' preferred payment method. There are many
advantages to using plastic money, such as convenience, safety, and
security. However, there are also some disadvantages, such as fees and the
potential for fraud. Despite the disadvantages, plastic money is here to stay.
As the world becomes increasingly digitized, we can expect to see even
more growth in the use of credit and debit cards.

 What Is Plastic Money?

 Plastic money is a term used for credit cards and debit cards. It is a type of
payment that allows customers to make purchases without using cash.
Plastic money is convenient and can be used anywhere that accepts credit
cards. Many people use plastic money for everyday purchases, such as
groceries.
IMPORTANCE OF PLASTIC MONEY
 Importance Of Plastic Money
 In a world where cash is slowly becoming obsolete, plastic money is becoming increasingly
popular. There are many benefits of plastic money, such as:
 1. Convenience:
 Carrying around a wad of cash can be cumbersome and dangerous. With plastic money, all
you need is a card, and you are good to go.
 2. Safety:
 If you lose cash, it has gone for good. But if you lose a credit or debit card, you can cancel it
and get a replacement.
 3. Rewards:
 Many credit cards offer rewards points that can be redeemed for travel, merchandise, or
cash back.
 4. Protection:
 When you use a credit card, you have protection against fraud and theft.
 5. Universal Acceptance:
 Plastic money is more convenient, safe, and rewarding than cash. It is also more widely
accepted, making it the preferred choice for many people. Plastic money is accepted
everywhere, online and offline. This is especially useful for travelers.

VARIOUS TYPES OF PLASTIC MONEY
 Plastic money is a term used for credit cards and debit cards. It is so-called because these cards
are made of plastic. Plastic money is very convenient to use. You can use it to buy things without
having to carry cash with you.
 There are many diverse types of plastic money and the following are:

 Credit Cards
 Credit cards are a type of plastic money. They allow you to borrow money from a bank or other
financial institution. You can use this money to buy things. However, you will need to repay the
money plus interest.
 Debit Cards
 Debit cards are another type of plastic money. They are linked to your bank account. This means
that you can use them to withdraw cash or make payments directly from your bank account.
 Prepaid Card
 Prepaid cards are another type of plastic money. They are like debit cards, but you load them with
money in advance. This means that you can only spend the money that you have loaded onto the
card.
 Contactless Cards
 Contactless cards are a newer type of plastic money. They use radio waves to communicate with a
card reader. This means that you can make payments without having to insert or swipe your card.
 Plastic money is very convenient to use. However, you need to be careful with it. You should only
use plastic money from reputable sources. You should also be careful about how much money you
spend on your card. If you do not repay your debts, your credit rating will be affected.
 History of Plastic Money
 The history of plastic money began in the early 1920s when
American Express issued the first credit card. But it was not until
the late 1970s that bank cards really took off. This was due to a
number of factors, including the rise of personal computers and
the development of electronic funds transfer (EFT).
 Today, there are a variety of plastic cards available, including
debit cards, charge cards, and prepaid cards. In most cases,
these cards are accepted at millions of locations around the
world.
 Conclusion
 Plastic money in the short term is money that is in a plastic form
which means you can use it without having to carry the money
with you. It’s just a card that you swipe and the money is
transferred from your account to the other person’s account.
There are no restrictions on what you can purchase with your
plastic card. However, some merchants may not accept certain
types of cards. It’s important to review the terms and conditions
of your specific card before making a purchase.