Credit Cards and Debts

Credit Cards and Debts

Debt

Credit card is a tool. “It is a tool in which we buy things we don’t need with money we don’t have at price we can’t afford to impress people we don’t even like.” (Lee 2013). Credit cards are tools that can cause people to waste trillions of dollars around the world. The cards have made it difficult to maintain zero debt.  There are secrets that normal consumer people cannot see or understand the consequences of behind the rectangular plastic. A normal individual will see it as borrowed funds with which to pay for goods and services. While an individual with enough knowledge see it as a risk. If people with economical knowledge, see it as a financial risk then why we people still use it. Comparing the risk that these cards can cause and the benefits in terms benefits, believing that credit cards should not exist as many economists do is not a wrong thing. People deserve to know the big risk that they come across by just owning small piece of plastic that its intention to a third-party charge cards.

Throughout human history people used to live according to their income, they buy what they can buy and leave what they cannot afford until the credit card was invented. With the credit card people become capable to buy what they want, but can’t afford, causing them to be in debt. Actually, these cards now push people to be in debts in strange way as if it owns the holder but not them. The father of credit cards, Alfred Bloomingdale, came up with the idea for credit cards in 1949. Bloomingdale had an important lunch with an attorney and Francis X. McNamara. McNamara was then an operator of a small loan company. During this meeting, they shared stories and discussions on business which took them to the idea of introducing third party charge cards. It was at that moment where Bloomingdale was declared to be the father of credit cards. As the grandson of the founder of Bloomingdale’s, he had a lot of power with making financial decisions. (Lawrence 1992, p.1517).

This very adventurous idea that was discussed at that lunch table played on the world’s economy. These involved trillions of dollars and caused nations to fall under all the debts. There are many global financial disasters that occurred as effect of high interest values and it is not strange thing that his type of crisis happens again.

Debt is considered the number one financial issue that ruins people’s lives or even entire nations. It becomes a burden on their daily lives. “Nearly three-quarters of indebted individuals said they thought about their financial burden more than they wanted to.” (2019 ). People have the choice to buy what they want instead of what they need. Because of credit cards, these desires have become seemingly endless. For instance, professional gamers buy expensive tools in order to keep up with the newest games. This is necessary to keep up with the professional market, especially now with technology growing at such rapid rates. Credit cards allow them to buy these items without having save the money to do so. What happens is that a good or a service bought in addition to interest, the interest increases by the time which cause more money to be wasted for nothing useful. When The interest rises to a certain point, things change to be a financial disaster. In economic world interest increase, can be a door to a financial fail even for governments. The 1990s  “Tequila Crisis” in Mexico is a typical example for financial debts negative impacts, a whole government  economy fall and the misusing of the Credit cards loans was one of the mains reasons. However, it was solved by allowing limited …

People do not only use credit cards for things they do not need. There are times people go into debt for things that they actually do need. An example of this is student debt because of loans they need for college. It is not only tuition rates themselves, but the interest rates that the loans accumulate in order to pay for the tuition that causes people to go into debt. For example, wealthy people even struggle with paying off student debt. President Obama retained his student loans until he got a book deal during his time as a senator. “Obama took out $42,753 in loans to pay his tuition at Harvard Law School… [this] pushed [both Michelle Obama and his] combined outstanding balance at graduation above $120,000…” (Stratford 2013). Tuition debts make it hard even for people with a degree to find their way to success with the amount of loans they need to take along with the interest.  President Obama can be considered as rare case who made his way through reaching the white house. Considering other student with degrees entering the labor with the competition only few get some chances out those millions students  but what about the others with the loans. Getting an education became a risk because of the loans where education is a right before it is business. If it is not possible for education to be free at least interests should not exist.

credit card slavery or prisoners to debt has become a common thing.  To avoid prison,   Debts forces people  to  work till the whole  debt is returned with  interests which is referred as “Debt Slavery”.  Debts being for wants but not necessities are considered bad debts but debts for an investment is considered a semi-bad debt too sometime because there is still risks. It believed that “more than half of all millennials (classified as ages 18 to 37) “don’t know when, or if, they’ll ever be able to pay off what they owe” (Source) . Still in beginning of life and going through  debt slavery. About the investors, just a small percentage pf them invest successfully others fail. (Source).

There many ways of marketing and advertising credits cards. Rewards on credit card give people a push to spend more money as it meant to give them more rewards, but what they don’t see is that what they gain is really more debt. Source. Banks or firm that offers credit cards are business that gain something and spending big amount of money just to advertise means there is a trick. The trick lies with in the game of interests. An individual start with taking loan of  $40,000 and  end up paying triple what is owed which means a 80,000 for nothing but taking debt. People believe that Credit cards  is something called “Emergency Fund” which means they what they owe. Actually, they just  increase the debt the owe.

 

Conclusion

Even though credit cards can be very tempting and seem like a quick fix to many problems, they cause more harm than good. Despite the rewards companies promise, those are really ways for them to get you to owe them more money. As for student debt, this issue has more to do with the structure of the education system. Students should be made aware of the cost of college and the long-term effects of loan debt.

Work Cited

 

Lee, Brian. “Daily Quote: We Buy Things We Don’t Need.” Lifehack, Lifehack, 4 July 2013, www.lifehack.org/articles/money/daily-quote-buy-things-dont-need.html.

 

Lawrence, Ausubel M. “The Credit Card Industry: A History .” Journal of Economic Literature, vol. 30, no. 3, 1992, pp. 1517–1518. Journal of Economic Literature, http://eds.b.ebscohost.com.ezproxy.lib.usf.edu/eds/detail/detail?vid=12&sid=89c5163f-e7cd-44b3-8cae-56789507f11b@pdc-v-sessmgr04&bdata=JnNpdGU9ZWRzLWxpdmU=#AN=edsgcl.13563605&db=edsgao.

 

Stratford, Michael. “Obamas’ Own Student Debt Topped $40,000 Each.” Inside Higher Ed, 2013, www.insidehighered.com/quicktakes/2013/08/27/obamas-own-student-debt-topped-40000-each.

 

“Study: The Psychological Cost of Debt.” The Ascent, The Ascent Staff, 2019, www.fool.com/the-ascent/research/study-psychological-cost-debt/.

 

 

“Lessons from the Past – The Tequila Crisis.” Stewart Investors, www.stewartinvestors.com/en-US/education/lessons-from-the-past—the-tequila-crisis/.