Rs500, Rs1000 notes scrapped: Here’s how to go cashless
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In a surprise move, the government has scrapped existing Rs500 and Rs1,000 currency notes from midnight Tuesday (8 December). The move, which is aimed at targeting black money, will also encourage and accelerate the move to a cashless economy. Now that cash is no longer king, how do you manage your everyday and every-once-in-a-while transactions.
There are three types of cards available to use—credit , debit, and pre-paid — for any and all transactions. All debit cards are issued by banks and are linked to a bank account. Credit cards are issued by banks and other entities approved by the reserve Bank of India. Prepaid cards are issued by the banks and non-banks against their value paid in advance. Prepaid cards issued by the banks can also be used to withdraw cash from an ATM, purchase of goods and services from a point of sale machine (the swipe machine used for card transactions), or online purchases.
Electronic fund transfer
The other option is to electronically transfer money from one bank account to another. There are three options available for such transfers: national electronic funds transfer (NEFT), real-time gross settlement (RTGS) and immediate payment service (IMPS). All three services allow people to send money from one bank account to another. In NEFT, the money gets transferred during the bank’s working hours in hourly batches. According to the RBI website, there is no maximum limit for NEFT money transfer. RTGS is for high value transactions—starting at Rs2 lakh. With IMPS the money gets transferred immediately and the service is available 24x7. The maximum amount possible to transfer through IMPS is Rs2 lakh. All three services come at a nominal cost and may vary from bank to bank. NEFT transactions cost between Rs5 and Rs25 depending on the amount. RTGS costs Rs30-55, depending on the amount. In case of IMPS, the cost is left to the discretion of the bank but is usually around Rs5-Rs15. Senders pay.
E-wallets have become popular in recent years. Currently, prepaid payment issuers, banks and companies offer digital wallets. E-wallets are payment instruments where people can preload money and make payments. There are three types of wallets—closed, semi-closed and open. A closed wallet can be used to buy goods and services exclusively from the issuing company. Semi-closed wallets can be used to buy goods and services, including financial services, at select locations. Open wallets can be issued only by banks and can be used for purchase of goods and services, including at merchant locations or point of sale terminals that accept cards, and also for cash withdrawal at ATMs or business correspondents. People can load the wallet using Netbanking, credit or debit card. Wallets have transaction limits and validity periods.
In August 19 banks went live with unified payments interface (UPI) system. UPI, launched by National Payments Council of India (NPCI) allows one-click, two-factor authentication on mobile phones across bank accounts. It is run on the IMPS platform which means transfers are immediate. To use this facility, people will have to download a UPI-enabled app on their Android smartphone . They also need to have a bank account and a registered mobile number. With these, they can create a virtual ID on the app or use IFSC code and bank account number to complete the transaction. Mint has written extensively on using UPI (A quick tutorial on UPI). The service is free of cost for consumers right now.