Essays

Credit card usage has become so common that one really ponders whether there is life without credit cards. A connected question is, if there exists a life without credit card, is it worth living. In today's instant gratification world, the thought of forgoing credit cards in favour of a cash-only lifestyle seems as foreign as mailing a handwritten letter through the post office. Yet there are instances "where some people have declared, 'enough is enough!' and dedicated themselves to lives sans credit cards.

Most of the so-called liberated, polished and educated well-to-do people have a credit card. All non-card holders are those who are unable in obtain credit cards, or those who choose not to use them. Many of those without credit cards simply do not qualify for credit due to bad credit, no credit, immigration status or another reason.

Even when people find themselves debt-ridden and their privileges suspended by the credit card company due to non-payment, many of them choose to cling to their cards. They are still averse to lead a credit card- less lifestyle. It is because the credit card offers diem the experience of a lifestyle which they would not have enjoyed otherwise. For example, one can take a month long trip to a vacation spot with a friend with the facility of the entire expenses being charged on the credit card. Most people, especially the new generation, view credit cards not as a loan from the bank, but as extra income. A credit limit of Rs. 50,000 is often understood to mean that the person has Rs.50,000 to spend.

Credit card was actually designed as an emergency card, a readily available loan to be used when suddenly an unplanned expense crops up. It was a way of preparing oneself for the need to avail credit in the future, in case such need arises. What people miss is that debit cards can be equally used in such situations that traditionally demand a credit card.

It is perfectly possible to live a happy life without credit cards. They are not a requirement. It seems as if thinking has developed that we must have credit cards. However, the reality is that the practices of credit card issuers can be harsh on individuals. More and more people are stopping use of credit cards, after a bad experience with them.

Although it would be easy to blame the banks for high credit card bills, skyrocketing interest rates, and never-decreasing card balances, it is the fault of the cardholder when debts get out of control. Actually, credit cards themselves are not the cause of anyone's debt. Instead, it is the misuse of credit that is to blame. The problem is that many people, once they have paid off their debts, are anxious to jump back on the credit card express to Debtville. It is because in a credit-dominated society, a lot of people want to re-enter the world of credit without any ample reason.

The easiest way to handle a credit card is by paying off all dues at the end of the month. In fact, many of those who do not pay off their balance in full every month simply cannot afford to. An increased cost of living, a set income and the lack of a financial safety net lead a lot of people into deepening debt. Paying off every month gives a revolving line of credit, which is very useful. It works as short-term loans where you take the money upfront and then pay later so you do not pay any interest rate or fees.

Ultimately, one has to be an educated consumer as credit card companies want their (air share of profit from transactions involving these handy sheets of plastic. If they cannot get that profit through fees they will work to get them through interest rates. In some cases it can cost more to use a credit card than you may actually spend using the card.

In India too, credit cards have gained ground with a number of banks encouraging people to use them. The introduction of foreign banks in the country has further made the credit card more popular. Some of the banks that issue credit card are State Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank, IDBI Bank, ABN AMRO Bank, Standard Chartered, HSBC and Citibank. These cards have succeeded in changing the spending habits of Indians drastically. People no more believe in the old concept of 'simple living, high thinking'.

For more and more Indians, living on borrowed money has become a real story. Households borrow not for creating assets like building a house or buying a car, but to meet basic consumption needs ranging from food, transport and medical bills to even repaying loans. Credit cards help people to cope with a modern-day lifestyle which is based largely on branded existence and lavish spending. These cards also allow people to go on a shopping binge, promoted by motivators as the best way to fight depression. And rural India, too, is not far behind in this case. Thus, Indians, who used to shun being in debt at one time, are enjoying it at the moment. It seems that they have allowed credit cards to run their lives and pockets.

While a credit card makes a person life efficient and easy, credit card theft and fraud is a problem that is slowly but certainly spiraling out of control the world over. Card-cloning is  the lastest in a string of issues faced by the banking industry, by which card details are furtively recorded during transactions at petrol pumps and supcrnuirkcts and emailed across the globe for illegal withdrawals from ATMs.

While the banks and authorities grapple with theft and fraud, it is not just these conmen and tricksters that people need to be careful about.  Be charged interest after the first few months. Then there is the common occurrence of a sudden increase in the interest rate, with no forewarning. While banks have the discretion to make changes, the RBI Guidelines State that the total annual percentage rate cannot be more than 30 per cent. It is interesting to note that while the RBI has issued a list of quidedines, these are generally not issued to the consumer.

Late payment is another issue that plagues most consumers, because intrest is charged on the unpaid balance. Many people make cheque payments merits on the due date and with no mechanism to record the d.ilc of payment, card companies sometimes use this as an opportunity to slap on late Fees. Some banks have even introduced the concept of dunging people for not using their credit cards. And finally, banks are at liberty in reducing credit limit. The only way to avoid your credit limit getting reduced is by paying your credit card bill on time as well .is pay’s more than the minimum requirement.