You Credit cards are one of the most widely used things in modern days. Just as a coin has two sides, a credit card also has both good and bad sides. It depends from person to person about his views regarding credit cards.
A credit card is a form of loan card that allows you to make a purchase or any transaction of your choice with the bank’s money for some time, and you have to return the money after the period ends, and the cycle continues like this.
It was entrusted as a very new and safe method of the transaction at the start. They give us the liberty to pay for things later. They help us to buy something when we do not have the cash.
A credit card is a fast, safe and convenient method of payment that involves very little chance of fraud, and in case of any fraudulent charges, the bank will set up an investigation.
This point gives it an advantage over the debit card. As we all know, the debit card is backed by our bank account, so in case of any such fraud, the money will be gone from our balance, and we will suffer the loss.
The most exciting feature that credit card has are reward points, bonus, cashback, discount, etc. that we can redeem after a transaction but it varies from bank to bank. So research about a bank that gives high reward points and insurance.
American Express is a card network with high reward points but has slightly more fees and isn’t accepted in many places. Visa and Mastercard are the two most used card networks worldwide.
Apart from these, we also have Discover, Diners Club, and RuPay. Diners Club, Ralph Schneider, and Frank McNamara introduced the first credit cards back in 1950.
It has versatile use as it is accepted in many places, including online sites. Reading this, you may be thinking that owning a credit card has so many benefits. But it has significant drawbacks too.
Why Can’t We Use Credit Cards in All Transactions?
The number of drawbacks in a credit card system makes it unusable for all kinds of transactions. As mentioned earlier, we have to repay the credit amount used by the bank after the period ends. But if the due date goes, a heavy interest rate is implied along with late payment charges.
This will reduce our current credit score and cause problems while applying for loans and EMIs in the future. There is also interest in withdrawing cash from ATM ( Automated Teller Machine ) with our credit card.
So this transaction with our credit card will increase our expenses. Moreover, there is a credit limit applied to the credit card. We will have to pay additional interest if the credit crosses that limit. This prevents us from spending it in our all kinds of needs.
We should try to use the card only for some big purchases that we’ve planned from earlier. It is better to pay the small day-to-day expenses with cash as much as possible, or else all kinds of fees will add up in our credit and create a stir at the month’s end.
There are still some places where credit cards are of no use, like paying our house rent or in the nearby local shop. Many countries still have credit card acceptance facilities limited to their big malls and petrol pumps.
Most of the official work is still done with other payment methods like cheque and demand draft.
With the increasing number of smartphone users, people prefer instant payment methods like Gray and Paytm. It is undeniable that with the restrictions of credit cards, people will opt for another kind of payment.
Also, as the days pass, people are becoming more and more engaged with their workload, due to which they prefer instant income. But with the use of credit cards, they have to keep count of it and return the amount at the end of the month.
It creates another pressure on them. Other methods offer them to finish the transaction at that moment itself and no further engagement.
The perspective of banks regarding the credit card system is very profitable. Most of the banks charge annual fees for their service of the credit card. You will need to pay extra cost upto 2% to 5% for cash withdrawal using a credit card.
Apart from these, they have their main weapon, high-interest fees and late payment fees to customers who did not pay in due time. In this way, banks use the people’s reluctance and carelessness to earn the majority of their profit.
If the people remember to pay their bills in due time, a big share of the bank’s profit will get removed. Now this affects the rate of credit card utilization from country to country.
Most of the people from countries of Europe clear their bills in respective time due to their mindset in such a way that the popularity of credit card usage and bank’s profit decreases.
Most people in Europe don’t purchase items in installments or EMIs and spend their credit wisely. In contrast, people from the USA and India have the habit of buying things even when those are not necessary, which changes the whole credit card scene.
As the competition between credit card issuers is increasing, they are trying to provide new features. Neobanks like N26, Monzo, and Revolut are slowly rising in Europe like Germany, Britain, and the UK, mixing some credit cards and debit cards.
In India, too, credit card challenger companies like Slice Super Card are gaining popularity. They’ve partnered with Visa to issue their card and has features like no annual charges, no joining charges, and no other hidden charges but still provides exciting rewards and security.
Contents of the Credit Cards
Each credit card has its cardholder’s name written on it alongside a micro-chip, the customer’s account number, BIN (Bank Identification Number), date of expiry, CVV, bank’s logo, card network logo. On the next side, it has a magnetic stripe, signature strip, and card security code.
CVV is the abbreviation of Card Verification Value which is unique in every card, and its main purpose is security. While completing a transaction, it ensures that the customer has a physical copy of the card.
Somehow if someone gets to know your card number or account number, they can’t process anything because of this CVV number. It is a 3-digit numeric sign and you should keep it secret to you only.
BIN or Bank Identification Number is the first set of numbers on the card with the account number. It identifies the bank from where the yu have issued the card.
Apart from these, every card has its PIN or Personal Identification Number that is not visible on the card but you must remember this as a customer.
You have to enter the PIN to complete any transaction, and don’t disclose that secret PIN to anyone. The expiry period also matters. Generally, many banks expire the card on the last day of the month printed on the card.
Recent reports state that the value of credit available on USA credit cards is 3.06 trillion USD, indicating there are 1,103 million credit cards among the total population.
Out of these, the owner of all the 97 million cards is Mastercard, and Visa circulates 353 million cards. Citibank and Chase are also leading credit companies.
The credit companies conduct major business in the USA. In 2012, there were 905.6 million credit card users in the USA, compare to debit card users, which were 290.8 million. As the passing years, the number increased. In 2013, it grew to 917.4 million.
In 2014, it turned 945 million, and finally, in 2018, the number reached 1,103.4 million while debit card users were 320.9 million.
Earlier research has stated that an increase in credit card users indicates economic and technological development. The reports regarding credit card usage in the USA somehow show the development that happened to the country in recent years.
Many factors are affecting these. Store owners play a major role too. If they think that accepting credit card payments will cost them more money, they’ll probably not keep the provision of it.
Whereas, if they think about the competition with other stores and shops, they might start accepting it.
Making their place more technically advanced will attract more customers resulting in more profit for them. The intention of the owners and merchants also makes a difference.
No credit card acceptance means the use of cash, and people generally prefer cash payment in low price transactions like buying daily needs in local stores and nearby markets.
New technologies are introducing new systems and products to us. Slowly, Smartphone Credit Card or simply SCC is rising. The method allows customers to complete the transaction by waving their respective smartphones in front of the NFC (Near Field Communication) reader.
Though it seems to be an excellent technique, the number of people adopting this method is low. Maybe it will slowly emerge as more and more people get to know about it, and the technique will improve.
Among all this, we should also keep in mind the different fraudulent charges involved in credit cards. Already a heavy amount of loss has occurred in the past, and the banks are working daily to reform their identification methods.
With the increasing number of digital payment methods, scam activities have also risen. Authorities and institutions are working to develop new methods to detect any scams and charges.
The world runs with different opinions from different people. At first, the swipe machines were not so smooth and caused inconvenience. Gradually, the machines evolved and were mainly accepted.
Also, different countries have different ideas. Some people are genuinely so rich and have a large amount of money in their bank that there is no need to borrow the bank’s money. They can use their debit card or pay through Paytm.
Many societies still idealize using cash. Why? because they fear the consequences of paying high interest if they fail to repay within the given timefram. However, these things vary with people.
The availability of credit cards gives people the freedom to overspend, and many people fear this thing. Many studies tell people to have more chance of spending more while using a credit card.
So it is also a nice thing not to use our credit cards in all forms of transactions. Some believe that if we purchase items but we can’t repay within the due date, it will cause more trouble. This type of myth never boost the common people to use a credit card for all transactions.
Ultimately the conclusion comes that people need to go with the flow. And keep in mind that excess of anything is wrong.