Non-cash money is finance located in bank accounts assigned to individuals or legal entities and used by them to pay for purchases, services or conducting money transactions. Non-cash money circulation includes absolutely all payments made without printed banknotes. In other words, financial transactions are carried out through appropriate records on the status of accounts of payers and recipients without the use of cash.
The essence and purpose of non-cash money
The functions of non-cash money are no different from the properties of cash, so their purpose is described by five signs:
- The measure of value. It is formed during the formation of prices, i.e. value of goods expressed in monetary terms. Due to this, goods are compared among themselves. Pricing is influenced by production and exchange conditions. In order to be able to compare prices, it is necessary to bring them to a common denominator or a single unit of measurement.
- Medium of circulation. The expression of the value of goods in monetary terms is necessary for their implementation. And in market relations, the exchange of goods and services is impossible without financial intermediation.
- Means of payment. This function includes the previous one. With the development of loans, it is becoming increasingly stronger, and cashless payments only strengthen its position.
- Means of savings. Formation of a certain reserve
- World money, finance used in international settlements.
The most common in the modern economy are only 3 functions: means of calculation, accumulation and a measure of value. And money as a means of circulation is fading into the background. In many ways, this situation is facilitated by non-cash money. This means of calculation is becoming more relevant.
Cashless payments
So, the movement of cash and non-cash money is significantly different. But in cashless payments there is nothing complicated. The mechanism of how non-cash money works is quite transparent.
Just the required amount is withdrawn from one account and credited to another. Such transfers are impossible without the participation of banks, but they greatly simplify the movement of money. There is no need to have large amounts of cash and ensure their safety. This method is ideal for business transactions.
Types of cashless payments
Non-cash money is finance that requires documentary support in the form of:
- Payment order. The document obliges the bank to transfer the specified amount from the payer's account to the recipient.
- Letter of credit. A special account on which there is an amount sufficient to pay for specific goods and services, which is transferred to the seller only after providing supporting documents on the fulfillment of the terms of the transaction.
- Collection order. Used to collect debts. The collector is obliged to present the necessary documents to the bank to confirm his right of access to the debtor's funds.
- Checkbook. This type can be attributed to cashless transactions, since finances are not necessarily transferred from the account of the check holder to the account of the bearer of the check, but can be issued in cash, but only within the limits of the amount on the account of the holder of the checkbook.
- Electronic money. These types of wire transfers are also carried out through the intermediary of financial organizations and must be carried out taking into account all the requirements of the law.
Monitors and regulates the movement of non-cash funds of the Central Bank of the Russian Federation. As a rule, operations conducted with accounts within the country take place over two business days.
Electronic money
Non-cash money also includes electronic money widely used in recent years. Their main advantage is mobility. They are also used to pay for goods and services. You can use them at any time, being anywhere. The only condition for access to such finance is the availability of the Internet.
The turnover of electronic money is mediated by various payment systems. They may establish some additional rules for the circulation of funds, but these requirements should not contradict the conditions established by the Central Bank. In fact, electronic money, as with other non-cash transactions, is transferred from one account to another.
Cashless payments of citizens
Individuals use, in contrast to cash, bank cards, which can, in turn, be debit, credit, or even mixed.
The credit card contains bank funds provided to the client on certain conditions and requiring a refund. To issue a credit card, the personโs solvency is checked and a contract is concluded that sets out all the conditions for using this loan product.
Debit cards are often used for everyday operations: cash withdrawals, payment for goods, money transfers. But this is done only within the personal finances of the client, without attracting bank funds. Such cards are used in salary projects.
Mixed cards perform the same functions as debit cards, but have a limited overdraft, i.e. additional (credit) funds. The size of the overdraft is negotiated by the bank separately.
The difference between cashless payments
Everyone knows how settlement operations are performed when there is cash. Non-cash forms of money have their own characteristics.
The main difference is the presence of the bank. In addition to the seller and the buyer, all operations are accompanied and controlled by the financial institution that opened the account.
Advantages and disadvantages
The following advantages can be distinguished in the translation system:
- All operations with funds in the account are supported by bank documentation, so they can be tracked and proved if necessary.
- It is possible to carry out several financial transactions simultaneously, even requiring the payment of additional fees and commissions.
- There is no way for counterfeiters to replace banknotes.
- The costs of storage, accounting and transportation of money are reduced.
- Unlimited period of storage of finances in a bank account.
- There is no need to purchase and maintain a cash register.
But there are also disadvantages in the non-cash payment system , including:
- Payment of commission fees for brokerage services of the bank.
- The danger of technical failures that block funds and make their circulation impossible.
- The need for a constant cash flow for timely payment of banking services and other basic payments, which is inconvenient for small entrepreneurs.
Nevertheless, non-cash money is convenient, and with the right approach and choosing a bank, negative aspects can be minimized.