Introduction
Bourgeon can be attributed to an aspect that entails growing or develop rapidly. Credit cards have become popular in recent times. The card can be used for various purchases. They provide an easy and convenient means of paying for purchases and other expenses. Credit cards are normally issued by banks and other financial institutions. To acquire a credit card one has to open an account with an issuer of such cards.
The applicant has to pay all charges which include application fees, interest charges, and other penalties. He/She can then use the card to make purchases in all places that the cards are acceptable (Leech, 2001). The cards have a magnetic strip at the back that allows for verification of the customer’s creditworthiness by the sellers. The magnetic strip contains useful information that is red by a card reader.
The users are normally sent a monthly statement that shows them their credit status. However, credit cards debts normally have a higher interest rate than other kinds of debts. They can easily lunge one into a debt crisis. The low borrowing rates successfully enticed millions of American citizens to borrow more and buy houses, a phenomenon that leads to an increase in the prices of houses. This encouraged provision of more free loans by banks thus encouraging further borrowing by the customers. This eventually gave rise to a very high debt to income ratio.
Burgeoning credit cards
Many people are getting into credit card debt due to the dependability and the convenience the credit cards offer. Despite many people being engulfed struggling to pay and overcome their credit card debts, many more are registering for these cards and using them carelessly. Many people are addicted to buying on credit and hence the whole of their income is dedicated to debt payment. This leaves them with no other choice other than continuing to buy their goods on credit and leaving beyond their means
The banks on the other hand are not interested in providing the users with useful information that can enable them to make informed decisions. The banks are always profit-driven. With the increase in the number of several credit institutions, the banks seem to compete to increase their clients and their profit margins. This has to lead to the banks giving credit to individuals who can’t manage to pay back. Poor people are also accessing credit card facilities even though they won’t be able to pay back what they borrow.
Banks are also not genuine. Despite the current credit situation the banks are soliciting from car credit and have even increased credit bar line. This is going to entice people, some who are under a great streak of debts to increase their debts to acquire new cars.
This will further deny the victims a chance to appropriately use their incomes. Sellers accept credit cards more easily than they do cheques (Jennings, 2005). This is mainly because with credit cards the sellers are assured of money from the bank. Immediately the transaction takes place the seller is sure of getting his money because it is guaranteed from the bank. Cheques on the other hand can easily bounce. This makes the cheques less reliable compared to credit cards. However, the increase in the amount of debt and the equally increased use of credit cards show that many people are spending more than they earn, therefore there is a need for the customers to be very responsible.
Customer’s responsibility
The customers have a very great responsibility in dealing with credit card debts. Being the victims, they need to find a way of using the cards and other forms of credit responsibly. They need to be vigilant, keen, and always lookout for new developments in the markets so that they can adjust accordingly. Customers need to develop personal finance management skills to enable them to manage their credit card debts effectively.
The customers should always consider their ability to pay their debts before getting into more debts. For instance, a customer should be able to find out how much debt he/she will be able to pay during a given month and then find the proper combination of credit cards that can help them get the maximum out of their credit facilities. The customer should try to always keep track of their activities. This can only be possible if the customers keep several credit cards that they can manage effectively. Keeping track of one’s activity helps the customers to notice discrepancies and fraud and thus they can be dealt with appropriately.
More than often the accounts a customer has had for a longer period are always an important building block of their creditworthiness and a proper reflection of the year that was spent diligently paying on time. The length of existence of an account is often a major factor in establishing a customer’s creditworthiness. Hence, before closing an account the customer should consider the age of his account and the past performance.
Customers should also ensure that in managing their account they don’t let the accounts lay inactive for over six months as this may damage their creditworthiness.
Opening several new accounts at any particular time also has varied disadvantages. For example, the card issuers are likely to give you low limits because of the uncertainty of payment that ownerships of several accounts create. Thus having few accounts with a higher limit is better. It is also easier to make big payments.
Owners of several cards can always vary the use of the cards according to the prevailing conditions and situations which can help maximize benefits from the purchases made. Some cards e.g. the low-interest-earning cards can be kept for emergencies. According to Tivoli (2006), It is always worthwhile noting the importance of having only cards that are best suited for you, and in deciding the number of the card to own always keep the income to debt ratio in mind.
Legislations
Proper legislation should be enacted to govern the provision of credit facilities by banks and other financial institutions and the amount of loan an individual can take at a particular time. There also should be legislation to protect cardholders from malpractice. The card companies should also be restricted from increasing the rate of interest on the existing balances in case the holder hasn’t delayed paying for over thirty days because this normally inconveniences card users financially, furthermore, the holders should be given at least twenty-one days from the billing date to their payment date and be protected from being charged late fees.
The debtor should also be protected, from debt collection harassment. Debt collecting companies normally harass people during debts collection. this discourages people from using credit facilities. To ensure that citizens are protected from this kind of treatment there is a need for the enactment of laws and legislation to protect the people.
To influence the legislations that seem to be burdening the banks, the banks should lobby for revision of the legislation and ensure that they participate fully in restructuring these legislations. The banks also need legislation that will help in dealing with debt defaulters legally. Bank may also employ dialogues with various authorities in charge of various legislative activities. Through such dialogue, the banks can have some legislation dropped or revised by the legislative bodies.
They can use bankers associations in championing their needs and requirements. Banks can also get their requirements in legislation can use influential politicians and political parties. Politicians can easily help to influence the government and can help in changing or discarding outdated legislations
Conclusions
There is a great need for the government to help in managing the borrowing by the public and the lending by the banks to ensure and encourage propped economic development within the country and prevent inflation. Government should give direction to financial services in the country. Expert under government employment can collaborate with consumer groups to help in eradicating malpractice. Malpractices can distort the sector of the economy and the economy as a whole. This is very suicidal to any nation whether big or small
Malpractice by both the banks and their customers can only be monitored by a keen government eye, thus the government should ensure that its departments charged with the responsibility of monitoring the banks is operational and doing the required job properly.
Educative forums should also be organized for the bank customers or citizens who may be interested in accessing credit facilities so that they understand this facility and how they operate. They can also acquire skills on how to handle this facility to get maximum benefits while purchasing goods.
Card users can also be allowed to form an organization that can champion their needs and fight for their rights. In as much as they need to monitor their spending and always look out for fraud, card users also need a larger organization with the proper legal capabilities to protect them and monitor the activities of the banks as well as provide crucial information to the members. For example, potential card users can get information about what cards to acquire when they decide to do so and why they should opt for the cards advocated for
Proper use of the facilities and controlled lending can help reduce unnecessary debts that people incur debts due to the wrong enticement. Cardholders should set their limit in terms of the number of cards they can process at any particular time, they should also learn how to manage and minimize debts.
Generally, the numbers of debts we have seem to always increase due to our ignorance and careless impulse spending that usually inflates our budgets. We always buy a thing we don’t need without taking not only to realize when it is too late that our spending was uncalled for. Debt can be very dangerous especially when one property has to be auctioned to pay for their debts. This can easily leave you bankrupt.
Work cited
Beth L. Leech. (2001) Interest Niches and Policy Bandwagons: Patterns of Interest Group Involvement in National Politics.” The Journal of Politics. 63(4): 1191-1213.
Department of Trade and Industry Press Release, Debt Advice Boost (2005).
John, Tivoli (2006) The concept of fraud: the new error focusing on the right of the consumers Longman publications.
Marianne M. Jennings (2005). Business: Legal, Ethical and Global Environment 7th ed.