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.

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