Credit Card & The Effect of The Economy
The economic crisis today is taking a toll on everyone. The bank interest rates are dropping and the repayment periods are being shortened. Most companies are afraid to give out more credit than ever before because they can’t take any more risk in such economic climate.
If action is not taken immediately, this will actually lead us to another era of depression. Credit card companies are afraid to bear any more risk than they used too, that’s why they have increased the fees and interest rates. It is required to compensate for the increase in defaulted payments they get from jobless people. People are constantly being retrenched and the jobless rates are skyhigh right now.
What has the credit card debt done to effect the economy in such a way? When the economy hasn’t nosedived yet, people were using their credit cards as if they had free money from the banks. They thought that they could take all the time they have to pay back the banks.
Little did they know that the interest rates could actually increase the size of their payments faster than they can spend them. People started to get worried about their financials and couldn’t really concentrate at their work. That’s why most companies were seeing a drop in productivity and so much more employees got retrenched because of this.
Not only did their retrenchment not help them, it only made them worse since they wouldn’t be able to pay a single cent off their credit cards.
The government see that this is a huge problem and decided to bail their citizens out by giving them extra money. People would see this as free money and again spend it on things that they shouldn’t.
They should have put it back into repaying their credit card debt. This is a down spiralling problem that needs to be addressed properly. If not, the country will definitely go back into an era of depression.
In order to stimulate the economy, it is much better to use cash when purchasing items so that everyone feels much safer that they have been paid. If the credit card debt issue isn’t solved as soon as possible, more people are going to suffer which will lead to a global depression.
In a nutshell, credit cards are double edged swords. They can help you in times of hardness and they can pull you down when you least expect of it.
The Effects of Credit Card Debt And How To Solve It
Credit card debt is the fear of most people nowadays. What’s even worse about getting in a debt is that they don’t even know how to solve the debt. Most people don’t even know how to climb out of debt once they are knee-deep in it. With the existence of credit cards, it has never been easier to get into debt.
So how did this credit card debt begin in the first place? As much as it seems to be a problem of the cardholder, the issuing banks play a huge role in this as well. They constantly offer enticing deals and great offers which range from no annual fees, cash back bonuses and free gifts. People who don’t read the terms and conditions and fine prints of these offers get sign up for the credit card deals as fast as possible.
Little did they know that it is a start of a financial disaster if not handled properly. Most of the targeted demographics are young college students who don’t understand how to handle money yet.
Most credit card users don’t even know that the effects of credit card until they are stuck in one. The first symptom of getting stuck in a credit card debt is being only able to afford to pay the minimum payments every month. The debt becomes worse when payments are frequently missed.
So, what should be the solution of this problem? You first have to admit that you are in a credit card debt and see it as a huge problem first before you can be helped.
If you are one of the few that know how bad your debt has started to become, your debt probably isn’t too much to be a big issue of. So, all you need to do is start paying off the card that has the highest interest rate first. You can focus on it by paying a little more money towards it first.
Another method is by requesting for a lower interest rate from the credit card companies. Some have these types of programs to help you pay up all your payments. All they want is to get back the money you owe them, so it’s actually a win-win situation.
If you have been in debt for a long time, these 2 steps are enough for you to start getting out of debt. It may be a tough journey, but patience and effort is required in order to go through this tough period.
What We Can Learn From The History of Credit Cards
The function of credit cards has existed a very long time ago, however it was not in the form of cards. It merely existed in the form of credit which is a way the buyer can purchase goods without having any cash in hand.
Back then, credit card took many forms which ranged from metal credit tokens, metal plates, paper, fiber and etc. Until recently, it only became plastic cards.
Credit cards are a real convenience when shopping because each of the card has a different number that identifies its owner. With just a swipe of the card, all the information of the owner will be transmitted into the database of the merchant. This saves both parties time and eases transaction for both buyer and merchant. At the same time, the credit card companies get their business too by charging a percentage of what the merchant earned.
The first official credit card was started by John Biggins of Flatbush National Bank of Brooklyn. The Charge It program was used by the merchants at that time. How it worked was by having the merchants deposit sales slips into the bank, the bank then records the data and charge the customer who used the credit card.
A few years after that, in 1950, The Diners Club credit card emerged. It started only as a card to pay restaurant bills. The card holder would be able to eat at the restaurant without bringing any cash. The restaurant would be payed by Diner’s Club and Diners Club would proceed to bill the cardholder. The Diners Club Card wasn’t technically a credit card since the amount had to be paid in full. Credit cards are different since you can only opt to pay a monthly minimum and take your time to finish paying the full amount.
In the early 60’s, traveling salesmen were sold credit cards because it was deemed a convenience for them. It was seen as a time-saving tool rather than a type of credit at that time.
In the 70’s, rulings of credit cards got so much tighter. The Congress started to regulate the credit card industry by eliminating the practice of sending credit cards to people who did not request for them in the first place.
Credit Cards – How Much Is It Actually Costing You
There are lots of statistics and reports being made about credit cards every year. It seems that it’s only negative news that we know about when they release such statistics on credit cards.
So why does credit cards cause so much problem to consumers? If you have never knew how much credit cards actually cost you, let me show you an example.
Let’s say that you went to the local store and you would like to purchase a pair of nice looking pants. The pants would cost you $100.
So how much did it cost you actually? If you paid for the pants in cash, obviously it only costed you $100.
However, if you were pulling out your credit card because you were too lazy to count some bills to reach a total of $100, it would have costed you more than $100.
Why is that so?
It’s because credit cards come with interest rates. If you used one that has an annual interest rate of 22% and you paid only the minimum every month, it would take you 5 years to pay off the pants. And the interest you paid would be $50.
That may not sound like a lot, but $50 is actually 50% of your purchase cost. Imagine buying a car with a loan that ends up with you paying 50% more just because there was an interest rate. You would be furious to find out about that wouldn’t you?
And, that’s why this serves as a reminder that a credit card has hidden costs that we wouldn’t really know about until it becomes too big of a problem for us to handle.
Well, the interest rate would have been much lower if you paid it off much sooner, but who does that when they don’t understand the hidden dangers of credit card costs?
In conclusion, credit cards will cost you lots of headache and money if they are not paid off in full every month. They work like your savings too, where each month the balance increases by a few percetage. Whereas for credit cards, the percentage increases by leaps and bounds till we find ourself in debt.
The Truth About Credit Card Offers
For years many have tried to figure out the best credit card deals out there. Credit cards aren’t was easily understood as you might think it is, no matter how much information you got from the surface.
If a credit card deal allows you to apply for its 0% APR, it sounds like a no-brainer to jump on that deal since you get 15 months interest free payment on a new purchase. However, if you read through the terms and conditions, you would have a different APR percentage if you have a balance on another credit card.
Credit card offers always make us think that it is a very great offer that everyone else should take up, but if you go through the fine print you will have a different view of the credit card companies. In fact, the fine print reveals how they would like to trick you into earning them more money by giving you false hope on their promises.
There are lots of amazing sounding credit card offers out there, which range from waiving your annual fee to offering the best coverages in your purchases. But one thing for sure is that they offer these great deals with only one thing in mind – which is to earn as much money as they can from you.
In order to earn more money in such economic climates, these companies will keep coming up with sneaky marketing tricks to make you think that you are having the best deal of your life. When they get your foot in their door, they will proceed to squeeze as much money from you as possible.
Now that you know how scary these credit card companies are, here’s what you can do in order to get the most benefit out of the credit card that you will be getting.
- If you have a very low credit score, you should find a credit card that will give you an interest free period on balance transfers from your old card. What this will do is help boost your credit score. When you are in the situation of a low credit score, all you should think about it is getting back to increasing it.
- if you have very good credit scores, you shouldn’t have to worry about anything since almost all the card will benefit you. You will only have a hard time choosing the ones that will reward you in the lifestyle you are currently in.
