Among various ways a consumer can pay for purchases, one of the most popular is the credit card payment. Since the moment of the credit card appearance, its popularity has been rapidly increasing. Many people choose to use the credit card for its convenience and protection it provides, such as the ability to control payments and keep records of purchases. However, credit cards can not only improve people’s lifestyle by providing convenient payments and helping built credit, but credit cards can also leave people with a huge amount of debts; it all depends on how people use them. Problems can be avoided if people understand the terms of the credit card agreement, spend costs wisely and choose the appropriate card. This paper is dedicated to the history of development, the main characteristics of credit cards, their advantages and disadvantages, and discusses how to use them without any obstacles and deriving maximal benefits from using them.
The history of credit cards began more than a century ago. According to Woolsey & Gerson, in late1800s, consumers and merchants exchanged goods by means of credit, using credit coins and charge plates as currency. In the early 1900s, oil companies and department stores used their own proprietary cards. These cards were established only at the business that used the cards and in limited locations. In the late 1950s Bank of America introduced the BankAmericard, which was the first universal credit card. The bank created a separate credit card operation entity that in the middle of 1970s became known as VISA. In 1966, competing banks created rival cards being grounded on the successful experience of Bank of America. This network of banks later created a union which became known as MasterCard (Woolsey & Gerson, 2009). Since that, during the years, the credit card system has been the subject of many disputes. Many have criticized credit cards for high fees and rates, which are often concealed in complex credit agreements.
However, credit cards have several advantages. If people are able to pay their bills on time every month and not carry over a balance, credit cards can be very comfortable to use. Credit cards can be used almost everywhere, and are especially convenient abroad. They can increase people’s purchasing capacity because they can be used to obtain goods and services over the phone, by means of the mail and online. They can become a sustainable financial backup in case if urgent situation, such as an unforeseen healthcare cost, losing job or auto repair, occurs. Credit cards let people buy goods and pay them off in monthly installments. They provide discounts at stores and rewards. For example, when people make purchases using the credit cards, they can collect bonuses; these bonuses accumulate and can be spent on getting free items, such as flight tickets. A number of cards can provide cash back as the motivation stimulus to use the card. Credit cards can help people build their credit history. Credit cards also save a record of people’s expenditures, helping them to watch their financial activities. Credit cards help people increase their credit score, when they pay their balances down by the established date. This enhanced credit history guarantees lower borrowing rates on other loans, including a mortgage. Credit cards provide people with the possibility to dispute billing mistakes and incorrect merchandise. Credit cards allow people to withhold their payments.
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Yet, credit cards may have a range of disadvantages, especially if used unwisely. Some consumers feel obliged to spend more costs than they possess. Consumers can permanently roll over a balance during several months. When people default on credit card payments, they are charged with late fees and interest, increasing their debt. Possessing a large number of credit cards is also not very favorable for lenders. Obtaining too much credit card debt by people can ruin their credit scores. Researches have demonstrated that credit card debt is an important factor in consumer bankruptcies. One of the essential disadvantages is that credit card fraud can easily occur.
Therefore, it can be stated with certainty that credit cards have a lot of advantages, and one of the most essential is a great convenience and comfort which come with the use of credit cards. However, there are several disadvantages which cannot be ignored. Nevertheless, there are some advices which can be handy for credit card owners to avoid problems which can be caused by credit cards disadvantages. In accordance with Francis, they are the following:
- Credit card owners should attentively watch their purchases and closely review their monthly statements.
- Credit card owners should have a budget and keep out from overspending.
- Credit card owners should make an attempt to pay off credit card balances strictly at the end of the month.
- Credit card owners should make purchases with sustainable companies and take extra safety measures when they make purchases online. 5. Credit card owners should report about stolen cards instantly to their credit card company (Francis, 2012).
In conclusion, it also would be appropriate to consider the future of credit cards. According to Woolsey & Gerson, while the plastic card is regarded as the standard nowadays, recent developments propose other types of payment which become famous quickly, from online services like PayPal to credit card key fobs to microchips that can be set into cell phones or other devices. With the huge amount of devices used around the world whose sole purpose is to read a thin piece of plastic with a magnetic stripe, the “card” in “credit card” is unlikely to pass from the scene any time soon (Woolsey & Gerson, 2009).