Americans Should Not Use Credit Cards Essay Essay Example

Americans Should Not Use Credit Cards Essay Essay Example Americans Should Not Use Credit Cards Essay Essay Americans Should Not Use Credit Cards Essay Essay Americans Should Not Use Credit Cards Com/156 Date: 08/31/2011 Instructor: Dierdre McKee Americans Should Not Use Credit Cards Why Americans should not use credit cards, throughout the United States,  credit cards  have become one of the most popular forms of payment in everyday shopping whether consumers are making a routine trip to the grocery store or  shopping online. There are various motives for not having a credit card and it is frequent for credit card companies to try to lure new or existing clients in by offering a zero percent interest rates and low fees. What they do not tell people is that there might be fees for doing so or that the rate only lasts for ninety days. These come in addition to  annual fees and late fees, which are insanely high. Sure, consumers can avoid them by finding cards without fees and paying on-line so that payment is not lost in the mail, but why go through that trouble? Interest Rates and Fees The one thing to dislike about credit cards is the  interest rates can be high if you do not choose the right one. To use a credit card correctly, one must make purchases he or she is able to pay off upon getting the monthly  bill, but some Americans  do not. Credit cards should be  only use as second-hand funds for emergencies only. A heavy user can be liable to abuse  credit cards. According to the Federal Reserve report, (2010), the total U. S. consumer revolving debt fell to $866 billion at the end of 2009, down from $958 billion at the end of 2008. About ninety-eight percent of that debt was credit card debt. Americans  who  utilize this financial tool are liable to spend more on transactions than those who purchase things with cash. As soon as the bills turn up, some people would pay only the minimum payment on their credit card. Keep in mind, small minimum expenditures just are not sufficient to cover finance charges. According to Mason, (2010), â€Å"Credit cards interest rates are at its highest in nine years. The average rate today is 14. 7% for every cardholder and last year interest rates was 13. 1% this is because of the new credit card regulations. In addition, new credit card rules may harm more than help. All of the credit card rules may force Americans to be more careful, but it is not going to help a struggling society pick up the pace,† (para. 2). Unpaid Balances No matter what the reason is for closing a credit card, it is imperative to make a note that not all credit cards should be closed. As a structure of damage control, some people decide to close a credit card when they have a high balance on it. According to Buttell,(2009) â€Å"This is not excellent because that balance will continue to build up high interest rate charges in the future and must pay off not only the remaining balance transfer but the purchase balance as well as any new balance transfers or purchases the consumer put on his or her card or cards. Before the cardholder can even touch his or her cash advance balance, which has the highest interest rate† (para. payment allocation details). What is an unpaid balance? An unpaid credit card is when a cardholder closes up a credit card account that has a  credit balance, the  credit card issuer credit limit  on that card is reduced to zero, and it comes across as if the cardholder has maxed out the card. According to Morah, (2009) â€Å"very high credit card interest rates are another reason why people close their accounts. If you still have an unpaid balance on a credit card with a high interest rate, closing the card. Beneath the existing state of affairs, it may possibly take customers years to pay off high interest rate balances,† (para. reasons for closing a credit card). What effect does an unpaid balance have on a cardholder? Having a maxed-out card, or even a card that simply appears to be maxed out, will have an unconstructive blow on the person’s credit score. â€Å"If someone has a horrible credit score, applying for a credit card is going to be agonizing. However, rates vary depending on the type of card he or she apply for, with a score below 599 the applicant will most likely be stuck facing an APR of 24% or higher. In fact, First Premier Bank offers a Gold MasterCard with a whopping 59. 9% rate for those people with less than perfect credit† (Ellis, 2011,para. 7). While creditors have no obligation to agree to negotiate the total sum a consumer owes, they have a legal responsibility to provide accurate information to the credit reporting agencies, as well as failure to make monthly payments. â€Å" In some instances, when creditors win a lawsuit, they have the right to garnish wages or put a lien on homes. That can result in a negative entry on credit reports. In certain situations, creditors may ave the right to sue to recover the money owed. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income,† (Federal Trade Commission,  2011). Conclusion Consumers who are in a tight spot may find themselves needing to use credit cards. Today’s  society is  continuously  struggling to get rid of debt, although while attempting to eli minate debt we sometimes  generate extra debt. The one foremost trouble  we all encounter dealing with credit cards is debt. Anyone should not want to utilize credit cards because they may create a spending routine that is awful. Not having power over these bad habits will consolidate and lead to more debt for the near future. Credit cards allow people to go into debt. This is not the way to build wealth and become financially secure. Yes, the borrower has to pay the debt back within thirty to sixty days, depending on billing cycle, but no one can ever go into debt if relying on using cold, hard cash to buy everything. â€Å"There is no positive side to credit card usage. A person will spend more if they use credit cards. Even by paying all the bills on time, the credit card companies will never lose. However, most families do not pay on time. The average family in today’s society carries the burden of at least eight-thousand dollars in credit card debt according to the American Bankers Association† (Ramsey, 2009). There is no assurance that debt settlement services proposes are legitimate and there is no assurance a creditor will allow fractional payments of a legal debt. In actuality, if a consumer brings to a halt making expenditures on a credit card, late fees, and interest more often than not are added to the debt every month. If the cardholder exceeds his or her credit limit, additional fees and charges also can be added. This can cause the consumer’s original debt to double or maybe even triple and all these fees will put anyone further in the hole. References Ellis, B. (2011, January  28). Credit card rates at record highs near 15%. . Retrieved from http://money. cnn. com/2011/01/28/pf/credit_cards_interest_rates/index. htm Morah, C. (2009, June  20). Should you close your credit card. . Retrieved from investopedia. com/articles/pf/08/close-credit-card. asp#axzz1WfEy2qTU Federal Trade Commission. (2011). Facts for Consumers. Retrieved from ftc. gov/bcp/edu/pubs/consumer/credit/cre19. shtm Ramsey, D. (2009, August  4). The truth about credit card debt []. Retrieved from daveramsey. com/article/the-truth-about-credit-card-debt/ Mason, A. (2010, August  24). New credit card rules may harm more than help []. Retrieved from cbsnews. com/stories/2010/08/23/eveningnews/main6798896. shtml Tomasino, K. (2011, August  14). Credit card APRs unchanged for 3rd straight week . . Retrieved from reditcards. com/credit-card-news/credit-card-interest-rate-report-0817-1276. php Buttell, A. E. (2009, June  Day). Until then, use these strategies to cut down debt Read more: creditcards. com/credit-card-news/law-bans-credit-card-payment-allocation-trickery-1282. php#ixzz1WfoH9fyc Compare credit cards here CreditCards. com. . Retrieved from creditcards. com/credit-card-news/law-bans-credit-card-payment-allocation-trickery-1282. php Federal Reserve . (2011). C onsumer credit. Retrieved from federalreserve. gov/Releases/g19/20100305/