Essay on The Effects of Financial Expertise vs. Financial Literacy
Today, purchases can be made in different ways. In this regard, the analysis of my payment methods reveal the growing trend to the wider use of electronic and credit card payments, which comprise the larger part of all payments that I make, whereas cash comprise the minimal level of payments that I make. The method of payment varies depending on circumstances but, as a rule, I make either electronic or credit card payments, which are the most convenient for me at the moment. Moreover, I believe the majority of consumers also prefer the same method of payments as I do since this is fast and effective method of payment and a large part of transactions are done in the electronic way.
The rise of the popularity of electronic transactions and purchases is, to a significant extent, driven by the popularity of e-commerce and increasing market share of e-commerce compared to conventional methods of payment. In such a way, the development of e-commerce stimulated the increase of electronic purchases and transactions. At the same time, the development of electronic transactions and purchases has both positive and negative effects. On the one hand, electronic payments are beneficial in terms of the speed of transactions because, as a rule, a transaction is completed within a matter of seconds (McDaniel, Martin, & Maines, 2002). In addition, electronic purchases are very convenient for consumers, because they can choose the target product or service online and purchase them right from their homes, workplace or whatsoever. Consumers receive their product or service wherever and whenever they want.
On the other hand, electronic purchases have a number of drawbacks. In this regard, the risk of the identity theft and loss of private information are probably the major risks associated with electronic purchases. In fact, these risks lead to the identity theft as well as financial losses resulting from the identity theft (Parrino, 2006). This risk increases along with the fast progress of technology that puts under a threat electronic transactions, which cannot always be fully protected since information protection systems cannot always match the progress of technology aiming at the identity theft and unauthorized access to the private information and consumer’s money.
In this regard, credit card purchases are similar, in a way, to electronic transactions, but still they are also very popular and comprise the major part of all of my purchases along with electronic purchases. In fact, credit cards are very popular because they open wider opportunities for consumers to make their purchases. For example, one of the major advantages of credit cards is the possibilities of using credits to purchase products and services. As a result, buyers can take a credit instantly to buy the target product or service (Pine & Gilmore, 2009). The consumer does not waste his/her time on taking a loan from a bank. Instead, the consumer just uses the credit card. In addition, the development of credit cards transactions became very convenient for consumers. As for me, credit cards are very convenient, when I am running out of money and need some extra money to borrow from a bank to cover my expenses. As a rule, I use it at the end of the month, before I receive the money I earn. Credit cards also offer an opportunity to make purchases fast and convenient.
On the other hand, the use of credit cards is accompanied by the same risks as electronic purchases since consumers also face the risk of the identity theft, if the private information about their credit cards is uncovered by the third parties. At the same time, credit cards are better than cash because they are not as easy to use to pay by the third parties as cash. At any rate, the owner of the stolen credit card, for example, always have a chance to block the card and prevent stealing his/her money from the card.
Nevertheless, I still use cash occasionally as well as many other buyers do but this method of payment is still relatively outdated and inconvenient compared to electronic purchases or credit cards. In fact, cash is not always convenient for sellers as well, especially for large companies. Instead, small business, where the cash flow is relatively low are more interested in cash because cash will not be as confusing for their accounting as would be the case of large corporations with a considerable capital turnover.
On the other hand, cash is still ‘real’ money compared to ‘virtual’ money used in case of electronic or credit cards payments. In fact, in case of a hypothetical shutdown of electronic or credit cards payment system or both, cash will be definitely an advantageous method of payment. However, such shutdown is rather hypothetical than real.
Thus, the use of electronic payments and credit cards is the most popular way of purchases for me as well as for many other people, who take advantage of convenience of using electronic payments and credit cards to make their purchases.
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