With so many products and services available through the internet these days, is there any more need for a plastic credit card?
Well, for most people, a traditional credit card is still useful for making in-person purchases and paying for hotel deposits and the like. But with the rising popularity of digital payment methods, plastic credit cards may soon be replaced by digital versions that can be stored on phones and computers.
According to the available data, it may already be happening. A recent finder.com survey learned that about 150 million Americans had used a digital wallet at some point in their lives. Proponents of digital wallets argue that this trend is good for the environment, as increased use of digital payment methods can significantly cut down our reliance on PVC plastic credit cards, which are partially derived from fossil fuels.
However, climate experts are quick to point out that data centers used to manage our digital payments can be just as environmentally harmful as a credit card manufacturing plant. These centers often consume vast amounts of energy, most of which are derived from fossil fuels.
Moving forward, a transition towards data centers powered by sustainable energy sources could be the key to making digital payments the sustainable alternative to plastic credit cards.
Why credit cards became the mainstream
Since their introduction to the American public in the 1950s, credit cards have become the most used payment method in the country.
They give you access to credit and allow you to pay for items without the need to carry large amounts of cash. They also come with enhanced security features like chip and PIN technology that protect you from fraud and identity theft.
What are the positive impacts of credit cards?
Unlike cash and debit cards, credit cards help you gain access to important personal loans.
Responsible credit card use can help you build a solid credit history that can open the door to mortgages and auto loans. Credit card companies favor customers who maintain low outstanding balances, often raising their credit scores to help them get future credit at lower interest rates.
With higher credit limits, customers can make large purchases such as furniture, electronics, and vacations without having to pay for them upfront. Customers simply buy the items first using their credit cards and pay off the balance over time.
Credit cards also allow cardholders involvementto earn rewards on their purchases. Several credit cards offer cash back, air travel miles, and discounts that can help you save money over the long term.
Do credit cards have negative impacts on customers and the environment?
Just like any human invention, credit cards have their drawbacks. They can harm cardholders and the environment alike if they’re used without discipline.
Because credit cards suddenly give you access to more funds than you previously had, it can be easy to overspend and quickly rack up credit card debt. Outstanding balances can accumulate interest very quickly. You might also get hit with fees for missing payments or going over your credit limit, in addition to the monthly or annual fees you might already be paying.
As for the environmental impacts of credit cards, most credit cards in circulation today are made from PVC (polyvinyl chloride acetate) plastic, which is very difficult to recycle.
PVC is made from nonrenewable fossil fuels and chlorine, which creates a sturdy and water-resistant material ideal for credit cards that see daily use. The only problem is that plastic credit cards release highly toxic pollutants such as dioxins and chlorine compounds when they are incinerated at the end of their life cycle.
Is there a need for credit cards to change?
Over the past decade, customers have become more aware of the individual and environmental challenges of using credit cards. Many have called for credit cards and the credit card industry as a whole to become more sustainable through the use of “greener” technologies and customer-focused services.
In response, several credit card issuers have begun issuing green credit cards made from biodegradable plant materials or recycled ocean plastics. Others have focused on creating digital credit cards that offer greater functionality to customers.
Credit card companies that allow their cards to be paired with smartphone-based mobile wallets claim that these digital wallets provide better security, convenience, and financial transparency to customers. Customers can make payments with just a few taps on their phones and receive daily rewards and promotion offers.
But despite their growing popularity, there is some conversation surrounding the overall carbon impact of digital payments.
How are digital payments impacting the environment?
Going cashless is becoming one of the world’s fastest-rising trends.
Surveys suggest that the number of digital transactions is growing by 14% year on year, with some countries like Sweden and China being on the verge of becoming cashless economies. But could this new trend bring more harm to the environment than our current use of credit cards?
Are digital payments vital to a sustainable future?
Digital payments may seem like they require fewer natural resources and energy to sustain.
They barely use paper or plastic during processing and can be conducted again and again using a smartphone or a computer. But climate scientists have discovered that digital payments can be environmentally harmful due to the tremendous amount of carbon emissions that data centers create.
Many of these centers and data networks operate 24/7 to process transactions and store our digital payment data. And with more than 80% of the world’s electricity still coming from fossil fuels, it’s highly likely that the digital payments we make every day emit substantial amounts of carbon emissions.
However, this doesn’t mean that digital payments can’t be a sustainable option.
With 57% of data centers believing that sustainability will soon be a key competitive differentiating factor, and 43% of centers already having a sustainability plan in place, it is clear that things may be moving in the right direction.
And with the possibility of data centers powered by renewable energy – and the lack of PVC-made credit cards or paper and metal cash – we may be making progress towards a more sustainable financial future.
What’s more important, the method of payment or where that money is going?
No matter what payment method you choose, it can be important to consider where the fees and profits of your transactions go.
Banks have come under intense public scrutiny in recent years for their involvement in the oil and gas industry. According to studies conducted by environmental organizations, the world’s largest banks have poured more than $3.6 trillion into fossil fuels since the 2016 Paris Agreement.
U.S. banks are the worst offenders, with JPMorgan Chase ranking as the world’s top financier of tar sands and fracking, among other fossil fuels, and Bank of America and Wells Fargo trailing closely behind.
Even if you were to choose a digital payment method that claims to be eco-friendly, linking a credit card from a fossil fuel bank to it would do little for your carbon footprint. Choosing an ethical banking provider can thus be crucial to reducing your environmental impact.
Benefits offered by credit cards vs. digital payments
In our fast-paced world, credit cards and digital payments help us make payments in seconds. If we use our cards often enough, credit card issuers reward us with points and deals that can help us get some valuable freebies.
Consumers’ needs in terms of rewards and bonus points
Anecdotal evidence and surveys conducted over the years suggest that customers prefer rewards that help them save money and earn free travel and spending perks.
The popularity of cashback and loyalty programs are testaments to these customer needs. Customers are willing to spend more to reach a points target that rewards them with a high-value gift, such as a free vacation package.
In most cases, the rewards that customers seek are aligned with their lifestyle needs. Customers who are trying to save up as much as they can use credit card cashback rewards to reduce their daily expenses. Others may prefer to rack up points to get discounts on airfare and hotel bookings.
Off-set your carbon footprint with an eco-friendly credit card
But there’s another type of reward that only a few credit cards offer – carbon offsets with every purchase you make.
These credit cards track the carbon emissions of your purchases and plant trees on your behalf to help you offset the emissions.
The Aspiration Zero carbon credit card is one of the best cards to offer this reward. Each time you use your credit card, Aspiration plants a tree for you through one of its reforestation partners based in Brazil, Honduras, Kenya, and Madagascar.
And in each month that you plant 60 trees with your purchases, Aspiration considers you carbon neutral. As a reward, you receive 1% cashback on all of your purchases in that month. Even if you don’t reach that target, Aspiration will still offer you 0.5% cashback on all purchases.
Ready to move towards a more sustainable future?
Aspiration is a B-Corp-certified online financial platform that does not invest any money in fossil fuels or any environmentally damaging business.