Question

Mary, an over-eager student, argues as follows: “Credit cards are money. I buy things with them all the time, and one of the main functions of money is as a medium of exchange. So, they’re money!” Do you agree or disagree? Explain.

Answer 1

I disagree with the statement,

Credit cards are not money , it is a loan that is provided by the issuer in the form of a limit or overdraft. It is a medium to secure loans from issuers which are banking corporations but it is not a legal tender. Credit cards also do not fall under M1, m2 and m3 , hence it is not a part of money supply. Money is also a liquid asset, which can easily be converted into cash which credit cards do not.

the obligation that credit cards carry along with it, does not make it eligible to be called as money. Only when the bill of the credit card os paid dies money comes into play.