The inevitable trap of credit cards and the preying by banks on their victims may lead many to bankruptcy. There is no easy way out of financial situations when income simply does not match expenditure. We all want the latest and best things on the market and many acquire them through loans on those pieces of plastic. The facts are, however, that the interest charged may mean that repaying such loans quickly puts it out of reach of meeting it.
Banks are not so honourable that they will surrender their biggest money earners, namely the credit cards. The ones who use them are ‚cash cows‘ supplying their lenders with huge incomes and vast annual profits. It’s like gambling when one puts money in and gets little back in return.
In times past I too was hooked on credit and then some valuable lessons came to hand. The goods I was buying during sales, and so forth, were costing twice as much as they would if the same items were bought for cash. Not only that but much of the stuff filling my cupboards was unnecessary and likely would never be used.
Banks and sales go together. One often sees stores offering extra discounts for using a Visa card. It does not take a genius to know how much the business receives back for this slight-of-hand deal. Nor does one need a calculator to check on where the institutions are making most of their money.
At the moment in Australia interest loans on property have never been lower. One can get a mortgage for something like 1.5 percent or even less. That is because the banks know that people will be forced to sell that property at a great loss if they go bankrupt through using their credit cards. With that in mind the offer of extended credit is given to the mortgagee.
There is a move afoot here to force banks to disclose the source of their income while the Opposition wants a Royal Commission into banking practices. With the focus on the ongoing links between credit cards and bankruptcy prominent in the media it is long overdue.
The best way to avoid the trap is to tear up the cards and have nothing to do with them. Bargains are only such when there is a genuine saving to be had from the purchase. If money is correctly managed then buying things for cash will quickly become a priority.
It is probably the greatest money cow the banks have ever seen. The credit card is a trap to woo people into spending what they don't have. That becomes a debt for which many won't be able to repay on time. The interest charged in that case is exorbitant and far more than a personal loan would cost. This is currently a moral issue in Australia where the Opposition is promising to hold a Royal Commission into banking practices.
What people need to do is wake up to the risk they take when using a credit card. First of all, do you really need to spend that money. Because of the easy access to it prices of goods have risen exponentially. This involves also what the financial institutions are able to charge for lending you finance.
As prices soar so the cost of living rises and while wages are falling the difference is now so great between what people owe and what they can afford to pay that many are forced into bankruptcy. This makes the banks happy because under those circumstance they can seize property, sell it far below cost, and keep the proceeds.
Credit is no different to putting money into poker machines or throwing it into the street. It is a dumb act to try to make it work for you. While it is used mostly by those who are already struggling the situation quickly spirals out of control.
The bottom line is use a debit card to avoid carrying cash. Don't spend money on things you can't afford and don't really need. Cut up the credit card and keep your finances in better shape. If you haven't got the money then don't spend it.