Mexico's cool new plastic money.

Lessons for the U.S. from abroad.
Jan. 4 2005 12:41 PM

Paper or Plastic?

Mexico and Australia have ditched paper money for plastic bills. Should we, too?

Illustration by Robert Neubecker

Considering it's the root of all evil, the sinew of love as well as war, money is surprisingly fragile. At least the paper variety is. The average $5 bill lasts only 16 months. Notes circulating in tropical climates wear even more quickly. I lived in India for several years and had more than one rupee bill literally disintegrate in my hands.

This explains why Mexico and 22 other nations have switched from paper to plastic money for at least some denominations. Plastic bills last longer and are more difficult to counterfeit than paper bills. They are less likely to trip up ATMs, and they carry fewer germs. Plastic bills look and feel like "real" money, though they are a bit slicker to the touch.

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The decision to switch from paper to plastic isn't an easy one. Countries take their money seriously. They want their currencies to convey stability and power. Plastic implies cheapness and artifice, which is why all of the countries using plastic money prefer to call it by a more technical name: polymer money.

Mexico, for instance, is now issuing a 20-peso note ($1.79) made entirely out of polymer, or plastic. The plastic peso has gone over well. It looks a lot like the old, paper note it replaced. Here's a photo. There's still a portrait of former President Benito Juarez. There's an added security feature, though: a clear plastic window, about the size of a postage stamp, that is extremely difficult to forge—and that's one of the main reasons Mexico made the switch to plastic. Only plastic bills have this security window.

Plastic currency has come a long way in a relatively short amount of time. Haiti and Costa Rica briefly experimented with a primitive version of plastic money in the early 1980s, but it was Australia that mastered the technology, issuing its first plastic bills in 1988 and converting entirely to plastic soon after. Each year, more and more countries are making the switch to plastic—most recently, Chile.

Plastic money has several advantages over paper. The plastic bills absorb less moisture and are therefore less likely to transmit germs, which is a danger, albeit a rare one, with paper notes. Plastic bills can endure a lot of abuse. You can twist them, bend them, and even put them through a wash/spin cycle without doing serious damage. They last four times longer than paper bills.

Plastic bills are also less likely to clog ATMs and vending machines, since they don't shed ink the way paper money does. Those tiny bits of ink—and dust—confuse the optical reading devices found in ATMs.

The switch from paper to plastic does require some adjustments. Mexican banks, for instance, have had to change the way they handle money. No longer can they staple bills together, a common practice in much of the world. I remember spending hours trying to gingerly remove staples from a brick of Indian rupees. The slightest tear and the bills were rendered worthless.

Plastic money is also springier than paper money. People have to make subtle adjustments in the way they fold their money in their wallets. And while plastic money is more difficult to forge, counterfeiters are remarkably innovative. They've already produced a few respectable copies of Australia's plastic currency.

So, how do the world's treasury officials make that fateful decision: paper or plastic? Money, it turns out, is a big factor when deciding what kind of money to use. It costs six cents, on average, to print a single U.S. bill. (A pittance, but the volume is tremendous—about 8 billion bills are printed each year.) Plastic costs twice as much to make but lasts four times longer. So, the cost advantage goes to plastic.

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