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Credit Cards and Bankruptcy


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.

The 21st century is wildly known as the technological era. We are in the second decade of the century but the changes and growth in technology is mesmerizing. It has touched nearly every other field in the world and has made concrete changes in their development. The technological advancements in the financial sector have made many financial tasks easy and accessible. Though the technology of online banking and transactions were introduced in 1990s, 2000's witnessed the drastic increase in the usage of this technology worldwide. In the same way, credit cards were introduced in the late 1950s but their usage increased as the world saw more technological advancements in the field. People were very skeptical in the usage of these cards and they were mainly used for international travels and to buy heavy expensive goods. But as banks started offering extra security measures and additional benefits on their usage from the beginning of the 21st century, more and more people are using this type of plastic money.

Credit cards are now considered as a boon. Their easy availability and hassle free use are changing its status from luxury to necessity. One can use them online or in person, in any part of the world. They have succeeded to bring the world closer and accessible in financial terms. Banks around the globe offer various types of credit cards as per their customers' needs, financial background and credit report. Borrowers have to provide minimum documentation to get a credit card and these cards are approved as quickly as within a day.

Banks offer credit to its customers to purchase or to pay for their desired products. It's like borrowing money from bank to pay for goods and paying it later in one go or by monthly installments i.e. EMIs. Banks charge minimum interest rate and processing fees on these cards. Some banks also charge card renovation fees every year. By having a credit card, you can pay for goods and services even if you don't have enough funds in your bank account at the time of transaction. You just pay the total billing amount later when you have funds. If you pay your card bills on time, it will increase your credit score drastically, which will eventually help you in future if you decide to take a bigger loan. Timely payment of credit card bills showcase your ability to pay off your debts on time and it works as a major trust factor in borrowing heavy sums of loan from a bank.

As mentioned earlier, banks offer different types of credit cards as per the financial profile of the borrower. Banks decide the credit limit on your card by analyzing your financial history, credit report, current financial obligations, employment status and ability to pay off the future credit debt. The credit limit is basically a number of amounts which is regarded as the spending limit. Each card has its amount limit for expenditure and the borrower is not supposed to exceed that amount. The credit limit changes as per the usage of the card. These cards also come with a large structure of reward points, discounts and cash back etc. Various e-commerce websites, restaurants, shopping outlets and salons get into agreements with leading banks to offer discounts and reward points to their customers upon purchasing goods or services from them. This helps them to increase their business and customers by offering them discounts.

All the banks which offer credit cards to its customers have come up with comprehensive security systems to protect the account information of their card users. These card comes with a special magnetic chip on its back, which protects the secret numeric information of the card holder. Also, if one uses such a card to purchase goods and services, the money isn't deducted from their account quickly. This way if someone misuses your card, you can inform the bank to block the card and would not have to pay for the wrongful transactions done on the card.

Having a credit card is a responsibility along with being a luxury and necessity. Though these cards are easy to use, one should always be careful not to misuse it. You should always pay your card bills on time to avoid late payment charges levied by banks. Also, you should always maintain your credit utilization ratio. That means you should not exceed your credit limit on the card. Also, you should not keep it unused. Not using your given credit can also prove to be harmful for your credit report. Credit cards can be used to withdraw cash from ATMs just like debit cards. But banks charge transaction fees of ATM withdrawals done on these cards. So unless it's really necessary, you should avoid withdrawing cash from ATMs using these cards. Many people fear that having a credit card may turn them into a shopaholic. But you have to control yourself to avoid spending more than you will be able to pay back. You should avoid going on unnecessary and uncalled for shopping sprees.

Credit cards come with many benefits like reward points, cash back offer and discounts. You should use these benefits, neatly. Know where you can use these benefits and how it will prove profitable to you. Do not forget to check your monthly credit card bill. This will help your to keep a track of your expenditure. It will also help you with your monthly financial planning.