Effects of Credit Cards

Times like these require everyone to have a credit card.

As far as studies show, the reason for using this little piece of plastic is more than just convenience. A credit card, after all, is both an alternative medium of exchange and a means of borrowing. These two main functions say a lot on the possible effects of credit cards not only on consumers but on the financial industry as well.

What do credit cards do? First, credit cards allow consumers to purchase a wide array of products that cannot be paid at the moment. This is very beneficial during emergencies when cash is not at hand. Credit cards are also useful when making arrangements for travel such as hotel, car, and airline reservations. With the explosion of online marketing, credit cards remain to be the most convenient payment method that can be used. Since the payment of credit cards is in installment and does not have to be in full, the loose reign that it has over consumers is very tempting. Imagine the line that all credit card companies use on their advertisements: “Increase your purchasing power.” The simple idea of power is already irresistible.

Still, credit card companies know how to shake things up. They attach certain privileges and benefits to their credit cards for consumers to choose them. They offer insurance protection, rewards programs, and even frequent-flier miles programs to lure consumers - and everyone just gets hooked.

In general, credit cards allow families and individuals to keep less money in low-yielding accounts like checking accounts and to take advantage of opportunities attached to the card. When used wisely, credit cards can help establish an excellent credit history. This will make application for loans, insurance, and jobs easier for the cardholder. The effects of credit cards on individuals are just amazing. However, the effects of credit cards on the lives of families and their future are dangerous.

The negative effects of credit cards far outweigh the benefits. It is a trillion dollar industry that lives on interests and fees and credit card companies know the right maneuvers to make things go their way. The simple fact that they allow extremely low credit card payments is already testament to their intentions. They want cardholders not to pay in full so that balances can accrue more interests. Once a cardholder fails to make a payment, they start raising interests, finance charges, and penalty fees. This will further rack up the credit card debt that the cardholder is burdened by but it will mean more revenue for them.

The recent economic slump is the perfect example to show the unforeseen effects of credit cards on consumers. The financial industry was the most affected and banks and credit card companies received the biggest hit. This definitely served as a lesson to consumers who enjoyed the beneficial effects of credit cards for so long without thinking of the consequences. It certainly proved that credit cards are addictive and dangerous. It is up to consumers to learn smart spending and payment habits to master the little piece of plastic that they own.


Source: Credit Cards For People With Bad Credit Rating

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