The use of credit cards is much more dangerous than use of checks or cash. Paying with
cash is very easy; for knowing how much money is available and how much can be spent
makes it very hard to get into debt. When paying with a check the process is a bit
trickier; the exact balance has to be kept on the account at all time. Knowing what this
balance is and continuously replenishing it can be quite hard. Nevertheless, even with a
check consumers can not get into a lot of trouble. If more money is spent then the
shopper has on the current account, the last written check will be rejected and account
will be suspended until the balance is paid off. With credit cards however, every year
more and more people get into debt.
According to American Bankers Association (ABA), Americans owe more then $387 billion on
their credit cards. This frightening number, averaging about $3,900 per family, is just
as bad for the economy as it is for the consumers. In September of 1995, for example, The
AT&T Universal card charged $15 per month for late fee to people who paid their bills
just one day after the due date. Visa, on the other hand, was charging the penalty fees
for as little as a dollar over the limit, plus an interest of up to 24.9 percent per
year. In the second quarter of 1995, overdue payments as a percentage of outstanding
balance hit 3.267 percent. That is the highest mark since recession of 1991.
"The picture is, some consumers are very, very deeply in debt," says Charles McMillion,
chief economist with MBG Information Services. A swipe of the card has become so natural
that many consumers do not realize how much they have charged, nor that it will take them
forever to pay that debt off. Seventy percent of respondents to a recent ABA survey said
that it would take them at least two months to pay off their holiday expenses.
Unfortunately, there are more ways to use a credit card than ever before, making it very
hard for consumers to refrain from spending a lot of money. Shopper can charge
groceries, teeth cleanings, and on-line services to their credit cards. Introduction of
rebate cards - which offer users credit towards new vehicles, frequent-flyer miles, and
cash backs has attracted a lot of shoppers, making them pay for things that they would
normally pay with cash or checks.
Credit cards are probably money of the future. Most of today's consumers are not ready
for this paper-less way of payment. Shoppers have to get used to using plastic cards as
carefully and intelligently as they would paper money. And although it is much easier to
use a little piece of plastic, people have to watch out for high interest rates and
overdue payments.
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