Free Americans and Credit Cards Essay Sample
There has been growing rate in the use of credit cards in the recent past among the American community. This has also elevated the rates of insolvency among them but there seems to be no change in their spending behavior especially on money that they do not have at their disposal. Shocking statistics indicate that credit card debts per household in America surpass the $15,700 mark while the total numbers of credit cards held are over 600 million. The statistics positions the average number of credit cards held by a family in America slightly above three. The expediency created by credit cards has made life relatively easy by facilitating the purchase of most items via online stores and reducing the possibility of carrying the bulky cash with us when we have to make to physical purchases. However, an August Report by Federal Reserve G. 19 indicates that the total consumer credit rating stands at $2.42 trillion as of June 2010 (Woolsey & Schulz). This is a clear indication that there are latent disadvantages that require Americans not to use credit cards due to accumulation of debt.
One of the greatest disadvantages of using credit cards is the fact that people do not feel the weight of money they are spending. This is enhanced by the fact that the registration process of acquiring the plastic money utility is easy. However, if one was to use cash in paying for the same items they have purchased, they could be required to be more conscious about their spending habits and limit them to fall within the elasticity of their pockets. When one is making payments of using cash instead of the credit card, they are able to feel the pinch of money leaving their pockets (Swart, 2004). This rarely happens when one is using the credit card since its use does not emotionally affect the user especially when they make expensive purchases.
Another reason why Americans should not use credit cards is the fact that it encourages one to make impulse purchases. This is enhanced by the same idea that they do not feel the weight of the purchases irrespective of the cost. This habit of impulse purchase places an individual at a position of not being able to make enough and careful savings for the future but would just be servicing the credit card. Additionally, there is a tendency of making overpayments for an item when one is using a credit card compared to the scenario when one is making purchases using cash. This seems to be generally driven by peer pressure especially for the college students.
The use of credit cards creates a problem of debt management and limits one to one source of money to depend on. This is enhanced by the habit of impulse purchase among many Americans and this creates a problem of financial insecurity among many individuals. It is therefore advisable for Americans who cannot monitor their spending habits to avoid the use credit cards. This is because their future is doomed and they might not be able to save for their retirement benefits scheme (Schneider, 2008). Having an insecure financial future is risky especially when caused by unplanned spending. It is important to note that most shopping malls count much on the impulse purchases made by individuals because it forms a base for much of their profits. While Americans may be delighted by the unlimited extent of their purchases, they should be wary of how they eat into their pockets while they help companies make profits from their uncontrolled buying habits.
The advancement in technology is another reason why Americans should limit their use of the credit cards. This is because of possible fraud that may result to loss of money and an individual incurring cost for purchases made on cards without their knowledge (Swart, 2004). When they are stolen for instance, if one delays in reporting the loss, they might be used to cover debts on their behalf. Fraud may also occur if the information is given to untrustworthy companies who may malicious use the information for the wrong reasons. American citizens should therefore be wary before they decide to use credit cards as their main form of making payments.
Another reason why Americans should consider well their use of credits card and how they spend is the huge interest rates charged by banks whenever they delay in settling monthly pay-offs. It is important to note that this is how banks make their profits regardless of how an individual is having troubles with their finances, which has driven many of them to massive debt and even bankruptcy. Additionally, just like any ATM transaction, the use of credit card comes handy with annual fees, which result in the elevation of cost of paying items with the limited knowledge of the user (Schneider, 2008). However, the operational fees contrast from card to card. This can also contribute to damaged credit ratings of individual without their knowledge.
Generally, most people use credit cards for short-term gains but this may at times result in long troubles even to their families. Most companies have been seen to target students by creating credit ratings that appear to make them look as if they have enough money to cushion their uncontrolled spending. Little do they know of the trap they are putting themselves. Whereas there are good reasons for Americans to use credit cards, it this study has identified some of the demerits that suggest why they should not use (Swart, 2004). Chief among them is the possibility of falling as victims of fraud, uncontrolled spending and impulse buying, annual transaction fees, and interest rates by the concerned companies. Americans should therefore reconsider their use and trust on credit cards.