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The Perils of Plastic

Much has been written on this site about the perils of conventional plastic, specifically credit cards, that lured people into spending money that they didn't have, and "hoping" to pay for things later. The fact that such a large amount of harm has been allowed to be inflicted on the public testifies to the great benefits of "plastic," to the ISSUERS. But there is another kind of plastic that is being foisted on SOLVENT customers, again, to the benefit of issuers.

There are a number of service providers, such as the New York City Transit Authority, and laundry machine operaters (among others), that will not accept coins or currency, but rather insist on consumers paying in plastic. (One laundry machine operator won't accept currency less than $5 for its card.) This in effect amounts to a "pre-paid" use. The operator benefits from the "float" between the time the buyer pays, and the time that the buyer uses the service. And if the buyer losses the a card with money on it, it is just pure profit to the operator.

Advances in financial theory have made financial managers very smart. Unfortunately, it has just given them new ways to take advantage of the public. Given the opportunity, very few resist the temptation.