Greedy Creditors and the Abuse of Consumers  Society is rapidly leaning on credit cards. More consumers prefer to carry plastic instead of cash. Moreover, the privilege of holding a line of credit is convenient and useful in today’s world. From hotel reservations and apartment rentals, to ordering online products, families are relying on credit as a time saving devise. As the importance of credit soars, money hungry creditors are taking advantage of the public’s reliance on credit cards.
Credit cards are essential for the escalated pace and demands of today’s society.
Consumers are increasingly using credit cards to simplify their spending. In addition, carrying cash is more dangerous than carrying credit cards and
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16). Furthermore, inaccurate information posses an equal threat to consumers. To illustrate, Heady (1999) purports that an individual called the automated teller for his required payment and was given the dollar amount, but not the change owed. However, after paying the acknowledged amount, the consumer received a late charge. When the credit holder questioned the company, their response was that the automation did not include the change owed because it would result in extra air time charges on the creditor’s eight hundred number. Another consumer was devastated when he accepted an offer for a card with a $1,200.00 limit from First North American Bank, but after reaching the limit the creditor began to lower the limit and raise the interest rate. Therefore, he acquired a higher amount owed in interest, plus over limit fees (Heady, 1999). Furthermore, Weber and Palmer (2000), state that when a consumer pays late, the creditor has the right to raise interest rates, however, if a consumer does not use a card, the creditor may charge inactivity fees. Cut up the card and the creditor is entitled to charge a closing fee.
A consumer with flawed credit suffers the most. Although creditors are happy to issue a credit card, creditors aggressively demand unfair funds from the consumer. Nelsons Reports, states statistics concerning Providian Financial Corporation, claiming that their net income grew by 86% when
Because of the Fair Credit Billing Act, individuals have more purchase protection using a credit card than with cash or a debit card (Williams, n.d.). Importance of this protection occurs when there are reasons to dispute charges such as when merchandise is not received, identity theft has occurred, or items are not charged correctly (Williams, n.d.). In addition, credit cards are invaluable in emergency situations from vehicle repairs to health issues (Williams, n.d.).
James D Scurlock’s “Maxed Out” focused on the revolving use of credit cards to charge now and pay later and the fact that once the credit card was maxed out another one was sent from the credit card companies and the whole process begins all over again. Scurlock’s essay made the reader aware of the downfalls and hardships that can occur when credit cards are constantly used for purchases compared to Kevin O’Donnell’s “Why Won’t Anyone give Me a Credit Card”.
Richard Fairbank and Nigel Morris, both diligent entrepreneurs, started laying the bricks for their eventual successful company, Capital One, in the late 1980’s. They both worked in the Virginia-based “Signet Bank”. Fairbank started noticing trends in the financial industry that he felt Signet was missing out on. These opportunities were in the credit card industry. He, as well as all of Signet Bank knew that the credit card industry was very risky, but Fairbank was ready to take a chance in this, what can be, highly profitable field.
Attitudes about spending changed drastically. At this point, more people had access to credit cards because credit card companies stopped limiting their customer base to the wealthy, and began issuing cards to people with moderate to low incomes (Garon, 2012, CNN World). This gave Americans a way to purchase goods and services immediately, even if they didn’t have the cash on hand. The seven to eight percent savings rate maintained in the United States from the 1960s to the 1980s plummeted to less than two percent, and remained so until the first decade of the 21st century (Melicher & Norton, 2014, p. 168).
Evaluation: This article, posted on April 1, 2016, was originally published on TheConversation.com. Throughout the article, the author cites sources that come from 2012-2017, with the majority of them coming from 2015-2016. Moreover, these cited websites are credible, well-known, and have information that can be corroborated with other sources. Some of these sites included The Wall Street Journal, the New York Times, and a report from the Federal Reserve. Moving on, the author, Mechele Dickerson, is an expert on this topic. Dickerson received both her B.A. and J.D. from Harvard University and currently works as a professor of law at the University of Texas at Austin. Here, she teaches classes on consumer law, debt and spending to law and undergraduate students. In her current research, she explores causes and consequences of consumer debt and how the culture
On a periodic basis, the Federal reserve releases key statistics related to credit card debt in America. With almost 2,000,000,000 credit cards in use while in the hands of almost 200,000,000 individual credit card holders, there is no denying the popularity of these little pieces of plastic. Through May of 2015, Americans were responsible for $901 billion in credit
Now that you have a better understanding of the risky business of owning credit cards, let us examine who is to blame?
Whilst a critical part of consumer spending, credit card companies are constantly accused of malicious legal contracts and schemes to increase profits. Without heavy regulation, these companies have the power to bankrupt millions of Americans that rely on credit cards in their daily lives. However, after the introduction of The Credit Card Act of 2009, these accusations represent an inability to accept responsibility for financial blunders on the consumer’s behalf. Due largely in part to the government’s strict regulations, credit card companies should not be at fault for the student credit card debt crisis. Credit card companies remain blameless for student credit card debt as a result of
Consumer debt has increased by 10 percent over the past three-year period. Credit cards are readily available from multiple companies which solicited the consumer by mail, internet, school campuses etc. Applications require minimal information giving the consumer hundreds or even thousands of dollars in minutes, causing the consumer to live beyond their means. Offering zero percent interest rates however, not mentioning after the first year interest rates rise to 21 percent making repayment schedule longer than anticipated.
In today’s economy, cash or a credit card is needed to meet the basic human needs. It is an apparent fact that we need cash or credit cards to purchase items such as food, clothing, and to buy gas. Also, when you are out shopping and discover that you have used all the cash in your possession, it is then that you realize that the advantage of having a credit card. Furthermore, with cash, you are restricted to the amount in your wallet or purse; however, a credit card allows you to pay for your purchase at a later date. Both cash and credit cards can be useful when you manage them wisely. While cash and credit cards are similar in that they both are readily accessible, used for goods and services at the time of purchase, they are dissimilar because of theft, high- interest rates, identity theft.
In the article “Credit or debit: pick your plastic,” by Lisa Gerstner, the issue the author writes about is the importance of consumers knowing the difference between debit cards, credit cards and prepaid cards. If consumers do not understand the difference between the three cards and the way to use them, they could end up in financial disaster. If the consumer understands the card, then it can be useful and can be used to the consumer’s advantage.
Students do not have the education needed to use credit cards responsibly. Nellie Mae (August 2007) states
Knowing what other outlying debts customers have could be helpful in determining high-risk customers. Along with past credit history this could be helpful in determining customers to reject.
Credit cards slowly and steadily have become convenience of modern society and a symbol of a developing modern global economy. They let you shop on credit and save you from the troubles of searching for an ATM or keeping cash on hand. Also, additional benefits of credit cards such as special offers and reward points are can make shopping fun and also helps banks attract new customers.
Progress in civilization in its turn has brought out radical changes in the manner of trading. The need for something intrinsically useful and easily applicable in everyday dealing is clearly felt. Cash in the form of currency notes and coins makes up just one form of the payment system. Development in banking while also giving inputs to the further development of cash brought about a second phase in payment namely paper instructions such as cheques and credit transfers. The requirement for greater flexibility and convenience has led to electronic payments, and this is where plastic cards have proved their worth. It allows the card issuers to limit the sum of money the card-holders wish to spend. The spending of card-holders who have defaulted on payments or who are over their credit limit can be restricted until the balances are cleared.