The focal point of this essay is to find one internet source about the subject that deals with effective measures to manage credit cards and one traditional source, a book in this case, and compare and contrast these two sources. The comparison would show the benefits and effective measures that should be taken in order to make good financial decisions. The internet source is “The Danger of Credit Cards: Tips to Help You Be Responsible and Successful with Credit Cards” by Laura Block-Stewart, published on Mar 26, 2008, in the online journal Personal budgeting. Suite 101. The book that would be taken into account would be “College Rules!: How to Study, Survive, and Succeed in College” by Sherrie Nist-Olejnik and Jodi Patrick Holschuh published by Ten Speed Press in 2007. Both the texts are quite current and speak of the dangers of mismanagement of credit cards and the remedies.
The online article looks into the parameters of the contemporary US economy as a whole and the methods of staying afloat by managing credit cards in a proper way. Thus, it is important to understand the ill effects of credit cards and realize the fact that it is a bad option as a financial instrument. To illustrate this issue the different domains of use and abuse of credit cards would be considered including hard statistical evidence to back the claims. However, the brighter side of the issue would also be highlighted but the bottom line would definitely point at the negative aspects of credit card use.
Credit Cards have gained a lot of popularity in the US and around the world. Most businesses use credit card services. Businesses, especially retail stores, have their own credit cards. Either they have just a credit card for their store alone or they might have a Visa, MasterCard, or even an American Express logo on it where the consumers can use that credit card no matter where they shop. This prompts the user to use the card indiscriminately and end up indebted under a huge sum of amount including the interests. Thus, the writer rings the warning bell on time. “Remember that by using your credit card you aren’t using “free” money. You still have to pay the bill and if you don’t pay your credit card off every month, the price of your purchase goes up significantly due to the interest the credit card company charges.” (Block-Stewart, para 3)
The article mentions in a clear manner that long-term cardholders who carry a balance, pay late, and on occasion would surpass their credit limit, thus incurring additional fees, would in fact be the most profitable customers for card issuers. The reason would in fact be that further penalty pricing in the form of higher interest rates would typically be imposed sixty days after a cardholder would violate the account agreement. This usually occurs in going past due on a payment. This higher interest rate may compensate the issuer for higher risk, it actually may tend to increase the risk for the consumer that pays it. The reason for this would be that there is a higher risk at default for the consumer credit cardholder as a resulting rise in costs.
The book deals mainly with the credit card problems related to college students. As this is a book of about 300 pages, the author had enough opportunity to provide a lot of data and analysis in order to establish the details of conscious efforts that the students should use in order to avoid additional credit card cost and manage it in a proper manner. The author indicates clearly, “If you begin college by using a credit card judiciously, you will probably continue to do so throughout your college career and beyond.” (Nist-Olejnik, 68)
The authors indicate that according to the research done, consumer credit is obtainable but it is not the key issue involved. The issue would be complex and competitive. This is because of the manner in which credit cards are offered that distract consumers from understanding the terms. The customers agree and accept the responsibility and consequences that travel hand in hand with credit use. Young people and others who would be new to the credit market would be more vulnerable than others would. Credit Card debt is often associated with spending too much and in place of using cash or checks, credit card balances would be utilized. Credit Card debt occurs regardless of who incurs it.
However, it would mainly happen to the inexperienced population, particularly in the context of credit finances.
In conclusion, it should be mentioned that both the texts convey the same feeling that the general customers and students are target market for credit issuers and banks and often their level of financial literacy would not include basic skills necessary to manage credit. Thus, it is obvious that the use of credit cards is a very bad habit and it is advisable to stop using credit cards if the users are not aware of the systems of credit card debt computations.
References
Block-Stewart, Laura. The Danger of Credit Cards: Tips to Help You Be Responsible and Successful with Credit Cards. personalbudgeting.suite101.com. 2008.
Nist-Olejnik, Sherrie, and Jodi Patrick Holschuh. College Rules!: How to Study, Survive, and Succeed in College. New York: Ten Speed Press, 2007.