CREDIT CARDS 2
Today during lecture, we watched the first twenty minutes of the documentary, “In Debt We Trust”]. For
decades, people all across the globe have relied upon credit cards to make their financial ends meet.
Most people in our Soc 1 class have credit cards. These pieces of plastic allow consumers to buy goods
and services now and pay for them later. The documentary we watched looked at the dark side of credit
cards. What can happen when people don’t pay their credit card balances off each month?
This week we also talked about values. I asked the question, should values be taught in school? We
debated this point. Some people argued that values should not be taught in the classroom, but a majority
of you believed that values can and should be taught in school.
To connect this week’s lecture material on values with the documentary “In Debt We Trust,” I am going to
create a hypothetical situation. Here it goes…
Pretend that you and I are having lunch at In-N-Out Burger. Because you are such a nice person, you buy
me lunch. I order a 3×3 (with chopped chiles) with animal style fries and a diet coke (of course). You order
a number two, protein style, with a chocolate milk shake. You whip out your MasterCard and charge the
lunch. We wait for our food to cook and for our number to be called. Eventually, the nice lady behind the
counter loudly calls out our ticket number. We pick up our food and sit down in a booth.
After the two of us sit down, I say to you, “Listen, [Insert Your Name], I appreciate you buying me lunch.
But don’t you know credit cards are poison. If you can’t pay for something in cash, you don’t need it. Plain
and simple.”
You take a moment to contemplate what I just said. Then you respond by saying, “Listen, Professor
Avery, I appreciate your viewpoint. But like usual, you are oversimplifying things. You are not looking at
the issue objectively. You are biased.”
Credit Cards
Some people need credit cards because they offer numerous benefits not provided by other
methods of payment. I don’t deny the fact that these cards are prone to overspending (Baker,
2007), and also that they attract undesirable interest charges, but the credit card users who use
them wisely experience more benefits than harm. This applies to even credit cards which have no
offers for frequent flier miles, cash back, or other rewards programs (Simon, nd).
The greatest advantage that I find in credit cards is their convenience. If a person has a
MasterCard, American Express, Discover Card, or visa in the wallet, it implies that he/she will
not waste time and resources to run to the bank for cash, count change or go through the tedious
process of writing a check for purposes of making a purchase. In fact credit cards are more
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convenient that debit cards, since debit cards often have 24-hour charging limits, which could,
for example, prevent me from buying the meal that I had set to buy (Simon, nd).
Credit cards help people in budgeting their monthly expenses, as long as the bills are paid in full
every time. The bill serves as a master receipt by displaying the list of the items on which money
was spent. Some credit cards like the one from American Express, which I use, categorizes all
purchases and sends periodical statements summarizing the cardholder’s spending, with
percentage breakdowns with regards to the amount spent on entertainment, fees, dining, retail
and so on and so forth. In fact, if the cardholder opens an online account with his/her credit card
company, a personal finance tracking software can import the data (Simon, nd).
Credit cards are also important tools for building one’s credit history. The borrowers’ report card
contains all information with regards to the manner in which the client uses his/her card. The
credit history records the responsible manner in which one handles his card, for purposes of
reviewing by potential lenders. A cardholder with high scores in the credit history demonstrates
creditworthiness. Other lenders thus may be interested to make transactions with such a
creditworthy cardholder due to the fact that he has demonstrated his ability to pay debts on time
and make conservative spending. Nevertheless, the converse holds true for an irresponsible credit
card user. If a user is irresponsible, he should expect the card to produce low scores, which
diminish his creditworthiness and may lead to either denial for future credit or payments with
much higher rates of interest.
Although in some cases the cardholder can be charged for failure to pay the entire bill on a
monthly basis (Munro & Hirt, 1998), the credit card company often offers a break in the form of
the float. This refers to a grace period in which the cardholder can avoid interests on purchases if
at the time of the purchase, the card does not have a balance. This implies that the cardholder
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enjoys a break of 20-30 days during which there are no interest charges levied on the purchase.
Thus, a wise cardholder can avoid interest charges on unexpected expenditures by utilizing the
float.
The card users can sometimes make the credit card companies to lessen the pain related with
such provisions like annual fees and annual percentage rate. The good thing with credit card
companies is that they provide room for negotiation on any issue, including the waiver of annual
fee, lowering the annual percentage rate, or excusing a late payment. All the cardholder needs to
do is to ask (Simon, nd).
It is also important to note that credit card purchases give a client a significant degree of
protection from theft. Although everybody usually hopes that the theft of the card does not
happen, it is wise for a cardholder who loses his card to inform the respective credit card
company. Most credit card companies guarantee their clients their efforts to help in resolving
theft issues, due to the fact that fraud is one of the greatest concerns in the industry. In general,
the client is only expected to assume responsibility for $50 to pay back the total spending of the
thief. This is very beneficial to the client as it saves him a lot of cash in circumstances where the
thief had expensive tastes. Some companies also provide zero liability policies for cardholders
who report the issue immediately. Meanwhile, those cardholders who have online accounts are in
a position to take note of the fraudulent activity with the credit card before the arrival of the next
statement in the mail.
Credit cards can also be used to get awards. For cardholders who do not maintain a credit card
balance, it is possible to make use of other rewards cards. For example, when one uses a gas
credit card, he stands a chance of receiving cash points, bonuses, or additional benefits just by
doing the ordinary task of filling fuel on a weekly basis (Simon, nd).
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Therefore, credit cards are very beneficial to people and we cannot live without them. They only
require the cardholder to be wise and to maintain a positive relationship with their card
companies in order to maximize on the benefits and do away with their “poisonous” effect.
References
Baker, C. (2007). In Debt We Trust As The Economy Goes Bust. OEN.
