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Cash, Credit Cards And Bitcoins: What’s Happening To All Our Money?

How we spend and perceive money is rapidly changing.

By: David Soffer  |@David_Soffer
 on 3rd December 2014 @ 5.46pm
bitcoins are a digital phenomenon and are nothing short of genius  yet devious and complex © Wikipedia
Bitcoins are a digital phenomenon and are nothing short of genius, yet devious and complex.

It’s an everyday occurrence; buying something and paying for it. Whether it was the train ticket you bought for your journey into work, or the cup of coffee you bought just before you got there, or perhaps the cheeky chocolate bar you bought because it was staring at you from the vending machine.

We don’t think twice when we buy anything and why should we; we earned our money, so we can spend it. However, how did you pay for those items; did you use cash, a credit card or something else?

It’s no secret that technology is developing at an amazing rate. As it has done so, we have entered into the world of ‘plastic money.’ What I mean by that is credit cards, debit cards and store cards; we can't get enough of them. It’s just so damn easy; the item is scanned, you put your card into the reader and punch in your PIN code and you’re done. What’s not to like about that?

Back in ‘the olden days’ people used to barter with goods and trade them for other goods they required. Undisputedly, trading in that way is very much an outdated concept. After that medieval way of purchasing came the trading of gold, silver and other precious metals which were used as ‘currency.’ Then came what we all know; hard cash: coins and banknotes.

More recently though, there has been the explosion in use of credit cards. They provide currency on credit (obviously) which can be used as and when we like. Then when the month is over we pay them off and start all over again. If it’s a debit card, it’s simply the hand into the pocket of our bank account where we store that hard earned cash. Again, it’s easy and hassle free.

But now there’s an even newer way of buying, selling and trading: Bitcoins. Bitcoins are a digital phenomenon and are nothing short of genius, yet devious and complex. They have been around since around 2008, but are becoming more widely used.

The way it works in principle is that you have an online account, you buy credit [the Bitcoins] and when you want to spend them you transfer them into another user’s account. In simple terms, it’s P2P (peer-to-peer) trading with no middle man. There is a transaction fee and this is how Bitcoin’s owners make a profit.

Why though have we moved away from the tried and tested methods into an unknown area? Bitcoins are less than 10 years old, yet the world of spenders seems to have fallen in love with them; what about our old friend cash, or our faithful sidekick; the credit card?

The truth is that there are pros and cons to any method we choose to spend our money; be it cash, credit cards, Bitcoins or anything else you can think up.

Cash is brilliant and we all love it. You know exactly how much that coin or note you hold is worth and it has no overdraft or restrictions on who can spend it. Additionally, we can all relate to cash and can immediately identify it. Who doesn’t recognise a $100 bill or a £50 note? Very few people and that’s partly why it’s so useful; it’s accepted and straightforward.

Also, having actual cash means that you ‘feel’ the money and are more connected to it and inclined to be realistic when you spend it not going overboard with what you buy then ending up in debt. It’s a social thing as well. How can you tell someone to “keep the change” if you’re using anything else?

The problem with cash though is that there is a lot of counterfeit stuff around which might mean that your £50 notes are actually worthless. Also, if you lose cash, you aren’t getting it back any time soon. And then there’s that issue of loose change. It’s bloody annoying to have 54 different coins jingling about in your pocket. That problem is truly exclusive to cash.

Then there are credit cards. They too have an air of brilliance about them. You’re temporarily short of cash but you need to buy something. You buy the goods on credit, on your card and pay it off at the end of the month. It’s like having a mini bank in your pocket every month.

there is a good side to bitcoins  for example  there is no middle man  be it a bank or a lender  which means that bitcoins are great for p2p trading © Wikipedia
There is a good side to Bitcoins. For example, there is no middle man; be it a bank or a lender, which means that Bitcoins are great for P2P trading.

Additionally, they are difficult to convincingly counterfeit due to measures like PIN codes and biometric chip inserts, which means your money is secure. Another temptation of credit cards is that many offer rewards based on points you accumulate the more you use it…hello free flights. They are also easily used over the web to buy things and they can be traced by the authorities if need be. Oh, and you won’t have any fiddly loose change anywhere.

However, there are pitfalls here too. It’s becoming more common for fraudsters to use cameras and other sophisticated methods at ATM machines to scam unsuspecting users out of their hard-earned money. Also, in order to get a credit card, your credit history is checked, which for some is not a pleasant experience and is something which may lead to your credit card application being rejected. Ouch.

Then there’s the issue of interest which you’ll have to pay if you don’t repay on time. And lastly, you lose your connection with actual money and we shouldn’t underestimate that.

How about Bitcoins?

Well, there is a good side to Bitcoins. For example, there is no middle man; be it a bank or a lender, which means that Bitcoins work out to be a very effective method of P2P (person-to-person) trading. There is little delay in their transfer and more and more people are catching onto this. In fact, there are advocates for Bitcoins to become an ACTUAL working currency.

Again though, there are problems with this method of spending money. Firstly, as a method of payment which isn’t fully established, they are not universally used (yet) for the buying of consumer goods. So unless you’re trading with another private buyer/ supplier, they are quite useless.

Bitcoins also come with a transaction fee; essentially another form of interest. I’ve got no gripes with Bitcoin’s owners making some money, but this means that unlike credit cards or cash, the initial cost of using Bitcoins is higher. Another problem with Bitcoins is that they are close to impossible to trace back to source.

You might be thinking that this is a good thing. It isn’t. It means that Bitcoins are rife in the underworld and in the world of drugs, paedophilia and fraud. What’s more is that should you get hacked, your entire Bitcoin fortune can be drained from you and no one will be prosecuted for it because no one can trace the perpetrators; goodbye compensation. Moreover, there is little if any regulation when it comes to Bitcoins, so no one is really accountable for anything at the end of the day.

Still appealing?

The authorities the world over, are continuing their battle with fraudsters, hackers and thieves. They are doing a fantastic job in difficult times and we should commend them for that. However, it is a battle which will always rage on because let’s face it; wherever there is money to be found, there will be dishonest people seeking to steal it from you.

When it comes to Bitcoins, not only do you lose all connection with actual money and how important it is in this day and age, but should you fall foul to any of the heinous tricks of the fraudsters, you won’t get anything back and that hurts.

What I’d recommend then, is a healthy dose of moderation. Use your cards as you wish, but don’t lose all contact with hard cash. It’s an important piece of all of our lives that we aren’t quite ready to give up altogether just yet.

tags: Bank | People

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