Question

In a modern economy, people use ‘plastic money’, like credit cards, to make many of their purchases on account of its convenience and safety. Is a credit card a form of money?

Answer 1

Credit cards do not qualify as money, even though they are commonly used to make purchases. While they function as a medium of exchange, they are not included in the actual money supply of an economy. This is because credit cards do not represent a form of payment in themselves but rather a way to postpone payment. When you use a credit card to buy something, the issuing bank pays the seller on your behalf. You are then required to repay the bank at a later time. In essence, a credit card serves as a credit facility provided by the bank, similar to taking a loan.