Disadvantages of Credit Cards

Disadvantages of book of facts Cards Mehmet back tooth Sevim 070090077 Faculty of forethought Faruk Cetiner 070090005 Faculty of Management Ceylin Ulusel 020090306 Faculty of Architecture position 201 Esra Sancak December 28, 2011 Disadvantages of Credit Cards Thesis It is argued that assign tease be beneficial for individuals notwithstanding they bring many another(prenominal)(prenominal) fiscal jobs, foundation consuming and cause mental conflicts in long-term period. I. Financial A. Penalty rate 1. Late payments 2. particular(a) impute limit B. Transaction fee 1.Interchange fee 2. Foreign consummation fee I. Consumption A. Trigger effectuate 1. Consumer culture 2. dictated purchase B. Spending dependence 1. Overspending 2. Indebtedness III. Psychological A. Behavior 1. Compulsive acquire behavior 2. Money attitudes B. Mental 1. Depression 2. Self Esteem pay can be defined as an art which leads to maximize leave against risk. Dramatically increase at industriali zation required to a greater extent proper(postnominal) management and revealed many departments of companies such as marketing, sales, human resources.Finance nominates pecuniary resources to these departments and as well are used for cash flow management. When finance became more authoritative in business life, finance industry emerged. Finance industry provides service associate with the management of gold. Banking service is the most ongoingness sector in the finance industry. It provides personal, commercial and mortgage loans which is colligate to with realization system. Credit fluff which works to loan money monthly to consumers, is the most important component of impute system. People can buy goods, services without cash thanks to credit tease.It can be seen that credit identity cod workout is so prevalent in banking system and most of the credit notification holders progress to more than one credit card. It is argued that credit separate are beneficial for individuals til now they bring many financial problems, inductance consuming and cause psychological conflicts in long-term period. First of all, credit card game bring difficulties for consumers related with financial problems. Credit cards can be so desperate financial tool when it is used by unconscious costumers. Financial difficulties related with credit cards are also derived from lack of knowledge around credit card usage.The first significant financial problem for credit card users is penalisation rate. Late payment is one of the reasons which gives rise to penalty rate. As Buttel explains, there is no difference between clipping periods when plenty paid their credit card payments late. Grace period changes between 20 and 31 mean solar days and even if card holders make their payments one day late, they are exposed penalty range. More everyplace, although payment is made before the impudent grace period, credit card holders could be placardd penalty rates if t hey dont pay their current bill(2003,para. 8-11).This is why it is important that credit card holders should be careful about making their card payments on time. Furthermore, exceeding credit limit is another reason of penalty rate. Buttel states, match to the Consumer Action, credit card holders are exposed to pay high payments and over limit fees with be dragging customer limit down below the current balance by somewhat credit card issuers (2003, para. 14). Clearly, some credit card issuers fox about credit card limits. aside from penalty rate, credit cards also result execution fee. To set off with, credit card holders suffer from interchange fee.When customers choose to pay with credit card instead of cash, they usually exposed to pay higher termss related with interchange fee. Mitchell states, Interchange fees not only enhance the profits of plumping banks at the expense of sellers, but ultimately these fees are paid by consumers in the form of higher footings (2009, para. 11). Obviously, credit card usage makes retailers rouse their prices. In addition, foreign transaction fee is a variable charge that card holders usually can not chase. In foreign countries, it is thinkable that credit card holders study to make more payments.As Gerson explains, foreign transaction fees are hided by some issuers and they are so hard to be followed even if the card holders ask them from the customer service or the corporal office. Also, if cardholders use a card like Bank of the States-issued Visa abroad, they have to pay Visa fee in addition to Bank of Americas own fee. This clearly shows the risk of using credit cards in foreign countries (2008, para. 3-5). Consequently, credit card usage brings along many problems related to transaction fee. Second of all, credit cards also have many trigger effects on utilization.The first major problem is the equals of changing consumer culture and how it reforms the psychology of the credit card users. As Sheth indi cates that triggers of consumption attitudes are largely provided by the independence that is connected to process of output and the increasing force of authorization, which are also parts of the consumer culture (2003,para. 3). This is a fundamental and a detailed explanation of the connection between trigger effects of consumption and cultural consequences. Furthermore, peremptory buying is another triggering impact of credit cards.According to Roberts, Jones, in the realm of consumer behavior, credit cards can sure be construed as promoting spending by making the transaction simpler or by removing the immediate need for money (2001, p. 220). It is obvious that credit cards stimulates spending in consumer behavior by many ways. In this case, these ii facts are truly supporting the idea that credit cards are triggering consumption attitudes. Spending addiction is another outcome of credit card based consumption. One of the results of this addiction comes to the scene as the ov erspending attitude.According to Roberts, Jones, increasing add of indebted people creates a psychology that consents overspending and excessive shopping as a normal behavior which is expected to be changed in time (2001, p. 214). This fact explains the general judgement of overspending behavior among indebted customers. Moreover, debt instrument is another significant impact of spending addiction. Griffin states that, instead of accepting indebtedness as a moral failure, mischance is a commonly approve excuse that obstructs making other approaches about the situation (2003, p. 4).This fact clarifies that misconceptions about indebtedness in consumer psychology can orient credit card users negatively and can give rise to unconscious consumption. Eventually, overspending and indebtedness can be counted as the major consequences of spending addiction which as it explained before- is triggered by many factors. The last and most dangerous effects of credit card usage are considered a s psychological effects. First of all, credit cards cause some differences on consumers behavior. Credit cards provide a financial confidence even if the users financial situation is not reliable.Consumers buy goods and services by money which they had not earn, that situation causes uncontrolled consuming desire. As Parecki states, Many researchers define compulsive buying behavior as a form of chronic addiction that is an endless cycle of trying to satisfy that which cannot be satisfied. sort of of creating healthy interpersonal relationships with other people, compulsive buyers replace their love and devote in the acquisition of objects (1999, p. 4). This definition clearly leads us to negative effects of compulsive buying behavior.In addition, credit card usage also causes price sensitivity of consumer which becomes unbalanced. As Fogel and Schneider cited in Roberts and Junes, irresponsible credit card usage is related with the money attitudes of power and prestige but not pr ice sensitivity (2010, para. 10). Credit cards cause irresponsible behavior because of the money attitudes of power and prestige. As a result, credit card usage changes consumer habits in a negative way. The second psychological effect of credit cards is causing mental disorders. Credit card usage and card debts mostly lead to depression.Card debts getting higher and higher by neglectfulness interest, and consumer becomes impossible about clearing that debt. As Stevenson cited in Andrews and Willing explains, when the negative experiences are researched according to their effects on anxiety and depression level, the financial drive has been shown as %21 among participants (2008, p. 5). Financial issues mostly trigger depression and anxiety. Because of the default interest, situation gets worse and worse. Beyond that, card debts and uncontrolled credit card usage leads consumer to lowering self-esteem.As Parecki cited in Cole explains, compulsive buyers see themselves undeserving and try to find ways to self-destruct. The consequences may include unemployment, bankruptcy, social isolation and divorce (1999,p. 9-10). Lowering self-esteem may trigger self-destruct. All of the higher up show us how uncontrolled credit card usage alter mental health. References Buttel, A. E. (2003, September 25). Credit card penalty ratesMistakes that trigger default APRs, from http//www. creditcards. com/credit-card-news/credit-card-penalty-rates 1267. php Gerson, E. S. 2008, November 21). Top credit card issuers foreign transaction fees, from http//www. creditcards. com/credit-card-news/foreign-transaction- conversion-fees-1276. php Mitchell, S. (2009, whitethorn 5). Soaring Credit Card Transaction Fees Squeeze Independent Business, from http//www. newrules. org/retail/news/soaring-credit-card-transaction- fees-squeeze-independent-businesses Sheth, J. , & Maholtra N. (2003). Global Consumer Culture. Retrieved October 18, 2011 from http//www. uwyo. edu/sustaindevsupport/doc s/Global%20Consumer%20Culture. df Roberts, J. , & Jones E. (Winter 2001). Money Attitudes, Credit Card Use, and Compulsive Buying among American College Students. The Journal of Consumer Affair, 35(2), 213-231. Griffin, B. (2003). Reviewed from The Character of Credit. Personal Debt in English Culture. Finn, M. Retrieved October 18, 2011 from https//www. history. ac. uk/reviews/review/435 Vohwinkle, J. (n. d. ). Examine the Roots ofOverspending. Retrieved October 11, 2011 from http//financialplan. about. com/od/savingmoney/qt/Overspending. htm