Credit cards can easily be given the title of being the cleverest financial instrument. Most the credit card holders look at this from one perspective, that it’s portable money and can be used anywhere, anytime. They disregard the term “credit” in the term “credit card” which means that there is a hidden percentage you have to pay known as the interest and a late fee charge. In simpler words, a credit card offers a loan as which lets you exceed the actual spending in your account. The bank charges an interest on the undue amount of credit card which you have to pay within a time. When you fail to pay it within that time frame, a late fee is charged.[irp]
This becomes an ongoing cycle if you fail to pay within the dates. In many instances, people have taken personal loans from family and friends to clear their dues with the bank and some simply don’t pay their dues as they don’t care being blacklisted by the bank. Credit cards have become acceptable around the world and are more convenient than carrying cash. All the hotels and shopping outlets prefer the card to cash, while some outlets simply do not accept cash. Now some hotels around the world insist on a card as they want to be aware of your credit history and do not accept any customer without the guarantee of a credit card.
However, credit cards have made life easy, the card is used when making airline bookings, for online shopping, to pay at restaurants and to pay for holidays. Credit cards create an illusion for people. Being paper money, it’s portable and the risk of it being stolen is low. This creates an illusion for people that they can exceed the amount in their accounts and purchase whatever they want to without because they have to pay back the amount with a certain interest attached to it.
People are not aware of the pros and cons attached to a credit card, they tend to overuse it and get caught up in the debt trap. Talat Hafez, secretary-general of the Media and Banking Awareness Committee of Saudi Banks, said the total credit card debt in the first quarter of 2014 had reached SR8.8 billion. People in debt because of credit cards need help, they may have misused the privilege but they need to be pulled out from the debt trap because the amount to be paid keeps increasing and it affects their family life and priorities.[irp]
The Banks clearly know who are most vulnerable and accordingly they approach their clients, and then offer benefits which allow them to fall back in the debt trap like increasing their credit limit. Agents selling credit cards tend to be very persuasive while selling credit cards but they never tell their clients that the misuse of credit cards could cause them a lifetime trouble. People who have previously fallen into their trap or are aware of people who have to opt for debit cards which allow you to utilize the amount in your account only and not exceed it. I am not against using credit cards but one should not overspend on credit cards.