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Credit Cards - 50Plus Discussion Forums
Do credit cards encourage people to excessive consumption, or is a tool to rationalize the consumption?
This question came to my mind when I read a short report that as a result of the Finacail crisis,many persons found them selves unable to pay the amont for credit cards and the interests on the transaction of credit cards
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Hotsands, for some people it does encourage over consumption and catering to your wants rather than your needs.
Like everything else it is a good tool to manage your money if you pay at the end of the month there is no interest, but if you don't the interest can be as high as 28% I understand (could be more).
My personal opinion is that it is way too high an interest rate and it is the people who have the least control and the least financial capability that pay this exorbitant rate.
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Bank analyst Meredith Whitney says that 90% of US credit card holders "roll over" their debt at least once during a 12 month period.
That means they don't completely pay off their credit bills at least one time and have an unpaid balance.
The people who carry an unpaid balance are called "revolvers" by the credit card industry and were the most prized customers.
Bank's are in big trouble.
Their default rates are continuing to rise at a record pace.
http://www.bloomberg.com/apps/news?pid=206...refer=worldwide
These statistics mean that the claims that "most" people use their credit cards prudently are simply fantasy.
The vast majority of people use credit cards to replace cash which they don't have.
They aren't using them to save money at the bank's expense.
If that were true, the credit card industry would have collapsed a long time ago.
I believe the credit card interest rates should be much higher than they are.
High interest rates discourage needless borrowing.
It makes people think twice about using credit cards to purchase things that aren't a priority.
Low mortgage interest rates encourage debt as exhibited by the explosion of home lines of credit.
Very often, people buy a home and use a home credit line for home renovations.
That is all good when home prices are rising, but if they remain constant or decline, the person owes on both the mortgage and the home line of credit.
What should happen is the government should make it easier to declare bankruptcy and wipe out debt.
This would protect consumers as credit card companies would be more careful who they lend money to.
There should also be laws which make it illegal to demand a credit card to rent a hotel room, or rent a car etc.
Why should people be forced to carry a credit card for anything?
A cash damage deposit would serve the same purpose, just as it did for the past 100 years.
Large expenses used to be funded by the companies involved.
We had things like "lay over plans" and for expenses like car repairs, the shop would let people make 3 equal payments or something.
At least with that method the period of debt was a couple of months.
The present credit card system turns that same debt into years and years of interest payments.
(it takes 17 years to pay off a credit card paying minimum payments 17 years).
Easy credit created the mess we are all in.
Prudent saver or frivolous spender....it doesn't matter now.
We are all paying for the problem.
Our pensions are in trouble, our jobs are in danger of collapse, our portfolios got whacked, our savings draw no interest, and our taxes are going to go up.
All this because of easy credit.
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Hotsands there are multiple meanings to the word rationalize.
In an investment forum the word rationalize is likely to mean make rational, remove the irrational.
Unfortunately the soft underbelly of society has largely taken over this word to mean almost the opposite, like offer up non-reasons as though they made sense.
Credit cards make it easier to carry out poorly considered purchase decisions.
Our marketing people are working hard, very successfully, to persuade people to make specific buying decisions that suit their interests, with a lot of foolish reasons.
Consumers have more and more been buying into the foolish arguments they have been offered.
Those foolish arguments make the wheels of business fly until they fall off.
Excessive consumption then is a tool used by businesses to make themselves richer and keep people employed for a while.
Easy credit is part of the package of inducement, and any device like a credit card serves the same purpose.
In a way we do not need to use credit cards to load up on credit.
We can have debit cards attached to checking accounts, and we can top up our checking account to make the whole thing look like a credit card.
The decision to use credit on a credit card is at least partly made before the spending is considered.
Now I have credit cards that have low interest, under 10%.
I never pay a cent in interest.
Having the card alone does not impel me to use credit that costs interest.
The decision to avoid paying interest impels that.
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If the interest is very high on your credit card 9 times out of 10 you can make a deal and get the interest lowered.
They would rather lower your interest rate than take a chance on you not being able to make the minimum monthly payment.
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Speaking of credit cards I ran into a strange case today.
I tried to make an on-line , out -of -country purchase with a credit card that I use just for that purpose- ie it has only a $500.
Limit. My card was rejected and they wouldn't tell me why -if they even knew ??
I have used this card in Canada and the US recently with no problems.
I called VISA Canada and they had no explanation and no suggestions except for me to ask the vendor to check with their VISA Merchant Service to see if they could get approval to use it.
Has anyone ever run into this kind of situation ?
Is there a solution ?
Thanks.
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Quote: Hotsands there are multiple meanings to the word rationalize.
In an investment forum the word rationalize is likely to mean make rational, remove the irrational.
Unfortunately the soft underbelly of society has largely taken over this word to mean almost the opposite, like offer up non-reasons as though they made sense.
Thank you don_f for your comment.Glad seeing one of the old members contributing in my thread.it is appreciated.
back to the meaning:As you know my language skills,but I chosen this word to mean the opposite to the first part.what makes restiction or lemit,what helps to prevent excessive consumption.what makes the the consumers consumption habbits is better.
I'm learing,and I find the feed back the others like you a helpful tool
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Credit cards are a huge convenience and a very good deal -- so long as you don't use them as a credit card -- ie pay the balance in full before it is due.
Used as a credit card, they're terrible.
You can get eaten alive by the interest charges.
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I keep a couple of credit cards.
but i wont pay interest,
never could stand paying interest.
kayrose
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In the close past,there is only one or two credit cards type.It takes time before approving your application,but why now it became a big part of the banking transactions?
strange thing that you can see many clean persons ,talk politely,and offer you their promotion which they say it competes and better than the others offer.
In the fact ,they almost the same
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Yessss, hotsands ,there is a big big selection of credit cards.
i just keep several
but i pay them off,
always,on the due date
because i will not pay interest.
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It always amuses me when people say, always self righteously that they always pay their whole card bill on or before the due date.
Do you really think that the people (revolvers?) get the bill and say "Well, I'm damn well not going to pay them right now.
They can just wait for their money." They dont pay in full because they havent got the money.
If they had the money they wouldn't be using the credit card in the first place.
If you are a poor family with children and cant afford to pay your heating bill and the company cuts off your gas or oil in the middle of the winter and your kids are sick and crying from the cold and you have a credit card - you damn well going to use it to get the heat back on even if you know you cant afford to pay the bill.
Then you try to pay the min balance and hope for warm weather.
That's the reality that many people live in.
The basic problem with the society we've created is that some people have too much and others too little.
Unfortunately the credit card - at first - gives an illusion of evening the playing surface.
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Probably true that some of the have-nots use credit cards to try to struggle through.
But an awful lot of people making big bucks fall into the credit card trap.
They buy the most expensive house that they can get financing for, lease a couple of BMWs, and start charging everything else on half a dozen or more cards.
And this probably on top of tens of thousands in student loan debt.
The real have nots have no access to credit, cards or otherwise.
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Well I agree with you to a point heatseeker but when you say the real have nots have no access to credit cards - that is simply not true.
The scenario I presented happened to me when we were young and living on one meagre salary.
And both my daughter and son were offered credit cards when they started college.
My daughter ran up 10K in debt (spaying and neutering feral cats).
As Ive mentioned she has ADHD and has very little impulse control - but she has no trouble getting credit cards.
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Go to any good sized city in Canada -- and a lot of smaller places -- and count the number of cheque cashing services, "payday loan" outfits and pawn shops and you'll have some idea of the number of people with no access to regular credit of any kind, and what's more, no bank account.
The reasons are many -- some are in the country illegally, many are hiding out from creditors, many more have no real source of income and probably never have.
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You are certainly right about the cheque cashing outfits - a shame and a sin.
Probably credit cards were more easily obtained at the time I am mentioning and the fact that one of us was gainfully employed and the kids had started to go to college was a factor.
But, still my daughter (gainfully employed) can still get a credit card.
BTW she's been on medication for ADD sufferers for a few years now and things have improved considerably.
- just thought I'd mention that.
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Glad to hear the good news about your daughter.
Being a parent has its rewards, and its trials, doesn't it?
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Quote: It always amuses me when people say, always self righteously that they always pay their whole card bill on or before the due date.
Do you really think that the people (revolvers?) get the bill and say "Well, I'm damn well not going to pay them right now.
They can just wait for their money." They dont pay in full because they havent got the money.
If they had the money they wouldn't be using the credit card in the first place.
If you are a poor family with children and cant afford to pay your heating bill and the company cuts off your gas or oil in the middle of the winter and your kids are sick and crying from the cold and you have a credit card - you damn well going to use it to get the heat back on even if you know you cant afford to pay the bill.
Then you try to pay the min balance and hope for warm weather.
That's the reality that many people live in.
The basic problem with the society we've created is that some people have too much and others too little.
Unfortunately the credit card - at first - gives an illusion of evening the playing surface.
actually yesss, i do have the money but as heatseeker says, its just convenient.
to use.
and FOR ONCE, I AGREE WITH him
Credit cards are a huge convenience and a very good deal -- so long as you don't use them as a credit card -- ie pay the balance in full before it is due.
Used as a credit card, they're terrible.
You can get eaten alive by the interest charges.
Quote: From heetseeker
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A friend has three credit cards issued in the US.
The last one offered checks and a 3% introductory rate.
He used it to pay off other debts and has $30k at 3% while he uses the other 2 cards for revolving credit.
It reduced his loan interest rate.
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