Credit cards are the number one killer ! According to credit.com, there was a national credit debt of over 900 billion dollars at the end of 2007.
Spending money is definitely a lot easier than making that money back. As a college student, I’ve experienced the danger of spending more than I earn at work due to the invention of the credit card. The history of Credit cards actually originated in the United States during the 1920’s when businesses and hotel chains issued them to customers. The first bank to issue credit cards was actually in Brooklyn New York by a man called John Biggins. As time went by, credit cards became more popular and in 1996, the Supreme Court lifted restrictions on the amount the company can charge customers in the Smiley vs Citibank case. Credit card companies may be making fortune advertising and attracting people to apply for credit cards but poor citizens and college students suffer badly.
Credit card companies use many marketing strategies and tactics to persuade people that they are actually doing a favor by “lending” money first and paying back later. Many people don’t know that late fees contribute to high interest rates meaning the more late fees you receive, the higher the interest rates. It’s very tempting to think that paying money later for money that’s spent now is a wonderful thing but you actually pay a lot more than you spend due to the interest rates. It’s great that you pay off all your bills once the statement arrives, but that’s not the case for many people.
Companies like to lure in customers by placing an eye-popping low interest rate on letters but when you actually apply for them, you may not qualify for the interest rate you thought you applied for. Some companies charge for not only late payments but also inactivity and over-limit charges. This means that you will get charged if you haven’t swiped your credit card in a specific time period or you charge over your limit.
The idea of payment allocation is something else that’s very tricky companies do to consumers. Some people that own a specific credit card are eligible to apply for a promotional low interest rate. They will think of ways to make the most money out of you meaning your payments will be charged with the lower rate but the overall balance left on your account will be charged with the higher interest rate compounded every day.
Credit cards are actually a good way to accumulate a good credit score but it’s really easily abused. The best way is to create a budget, save, and spend wisely. Don’t apply for a credit card for each store because you will definitely be tempted to use it. Have a couple on hand and it’s a good way to keep a record of the things you spent using a credit card because you don’t want a surprise attack at the end of the month when the bills come. And lastly, pay off your credit card bills on time and all of it if possible. Don’t let interest accumulate because you will end up paying for interest all the time.