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A credit card enables you to buy something now and pay for it later. As a result, a credit card can help you when youre short of cash. Further, carrying a credit card can be a lot safer than carrying cash. Cash can be lost or stolen. Credit can be traced so that youre protected against theft or loss.
Credit is not free money. Every dollar you change, youll have to pay back. A credit card enables you to buy things when they are on sale or when you need them, even if you dont have the cash at that moment. For example, you need your books at the beginning of the semester, whether your student loan has come through or not. You can buy online with a credit card, too. (OConnell, 2004)
Most important, using a credit card helps establish your credit history, which is essential for the big-ticket items youll purchase after graduation: cars, apartments, Houses. The privilege of using credit cards comes with a price, however- literally. How high the price depends on how you manage your credit.
Pay your balance in full, and on time, each month and cost is zero. Make partial payments or late payments, and the cost can be steep. The penalty for making partial payments rather than paying in full is called interest or finance charges. There are several different types of credit cards: bank cards, store cards, gasoline cards, and secured cards. (Cunningham, 2005)
Credit Cards have gained a lot of popularity in the US and around the world. Most businesses use credit card services. The businesses, especially retail stores, have their own credit cards.
Either they have just a credit card for their store alone, or they might have a Visa, MasterCard, or even an American Express logo on it where the consumers can use that credit card no matter where they shop. This prompts the user to use the card indiscriminately and end up indebted under a huge sum of the amount, including the interests.
Long-term cardholders who carry a balance, pay late, and on occasion would surpass their credit limit, thus incurring additional fees, would, in fact, be the most profitable customers for card issuers. The reason would, in fact, be that further penalty pricing in the form of higher interest rates would typically be imposed sixty days after a cardholder would violate the account agreement.
This usually occurs in going past due on a payment. This higher interest rate may compensate the issuer for higher risk; it actually may tend to increase the risk for the consumer that pays it. The reason for this would be that there is a higher risk at default for the consumer credit cardholder as a resulting rise in costs. (OConnell, 2004)
This is a dangerous trap for the average consumer and particularly students who are comparatively less experience in handling finance. According to the research done, consumer credit is obtainable, but it is not the key issue involved.
The issue would be complex and competitive. This is because of the manner in which credit cards are offered that distract consumers from understanding the terms. The customers agree and accept the responsibility and consequences that travel hand in hand with credit use. Young people and others who would be new to the credit market would be more vulnerable than others would. (OConnell, 2004)
Credit Card debt is often associated with spending too much, and in place of using cash or checks, credit card balances would be utilized. Credit Card debt occurs regardless of who incurs it. However, it would mainly happen to an inexperienced population, particularly in the context of credit finances. An average of students credit card debt in 2001 to be in excess of $2000, and 47% of these students carried four or more credit cards.
Regardless that credit card debt decreased from 2000 to 2001, the median credit card debt increased and the percentage with balances in excess of $3000 but less than $7000 increased from 13% to 21%. Those in excess of the $7000 range would have decreased from 9% in 2000 to 6% in 2001. (Rozakis, 2007)
Forty-two percent of former undergraduate students who participated in the 2002 National Student Loan Survey reported that student loan debt was a major reason for not attending graduate school. (OConnell, 2004)
However, there are many benefits to having a credit card. They are very convenient for use. One really need not carry cash if one is carrying a card. Furthermore, during the time of financial emergency, one can avail of ready cash all the time.
The only thing you have to remember is that there is always an APR rate, and that is an Annual Percentage Rate. As long as you pay that credit card in full the next billing cycle, you will not be charged the annual percentage rate. (Brundage, 2008)
Consumer credit is obtainable, but it is not the key issue involved. The issue would be complex and competitive. This is because of the manner in which credit cards are offered that distract consumers from understanding the terms. The customers agree and accept the responsibility and consequences that travel hand in hand with credit use. Young people and others who would be new to the credit market would be more vulnerable than others would.
Credit Card debt is often associated with spending too much, and in place of using cash or checks, credit card balances would be utilized. Credit Card debt occurs regardless of who incurs it. (OConnell, 2004) However, it would mainly happen to an inexperienced population, particularly in the context of credit finances.
It should be mentioned that general customers and students are target markets for credit issuers and banks, and often their level of financial literacy would not include basic skills necessary to manage credit. Thus, it is essential to practice safe method f credit card payments.
References
Brundage, C. (2008). Credit Card Survival strategies. Melbourne: HBT Publishers Pvt. Ltd.
Cunningham, S. (2005). Introduction to Financial Management. Hobart: DLTT Publications Ltd.
OConnell, B. (2004). Free yourself from Student Loan Debt: Get Out from Under once and for Al. LA: Dearborn Trade Publishing.
Rozakis, L. (2007). The Complete Idiots Guide to College Survival. Auckland: Alpha Books.
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