In the current world that we live in, the power of money has gone stronger than ever before. These days, it's not about the people around you that you wish to make happy. But more of the person inside of you that needs the rewarding and happiness.
The spending power of individuals has seen a sharp increase in all countries with people pampering themselves rather than thinking of somebody else. People will most likely buy something just on the spur of the moment without really thinking if that item or service was necessary. So the buying power goes without looking at the financial situation. This means, the plastic card is the most used weapon of trade rather than cash.
This is where unpaid credit or outstanding credit comes in. Banks will generally love to see their clients use their credit cards whenever they are shopping or travelling or dining. This is because the chances of the client overlooking the payment is high. Even when the client makes the minimum payment, it is still considered a profit to the bank due to the high interests rate.
Currently, the credit bureau centre does not bother on the number of cards a bank issues. The most important is the credit limit is combined to one value regardless of the number of cards. For example, if you have 3 cards issued to you from Bank B. The credit limit will be the same for each card. So if you spend $300 on one card and $500 on another card, then you have lowered your credit limit by $800 for each of the cards. Basically, it is a combined credit limit.
So when clients fail to make their full payments to the banks, this is where the high interest rates come in. Most card companies give a 24% annual interest rate for outstanding amounts left on the card. And the interest rate is packed to the first outstanding amount. For example, you have an outstanding amount of $50 this month. Instead of making full payment, you make a payment of just $20. So the 24% percent interest rate is packed to the $30 outstanding. So if the following month, you decide to put in $10 more. The interest rate is still packed at the $30 outstanding. It will not be reduced by $10. You have to settle the full amount in order to remove the interest rate. Let's say you purchase another item at $80 using the same card. The outstanding will still be on the $30. But if you do not settle this amount of $80, the following month, you will have get the 24% interest of $30 outstanding plus the $80 outstanding. So it will keep snowballing and people tend to apply for a balance transfer from another bank to stop this affect.
Yes it is good to have that extra cash to pay off this outstanding credit card amount. But will you actually use the money for this purpose? Or will you simply use 40% and the remainder 60% you will get that watch you been eyeing. And the following month, you probably balance transfer again. And again and again. So it ends when you finally exhausted all the loan facilities from every bank you can think off. And you probably be terchnically in debt. Think it's not possible for you to be so foolish? Think again. The spending power of people is due to the aggressive and innovative marketing strategies. Business players know how vulnerable people are to making themselves happy.
The level of technology has gone up. Designers know how to pull the crowd and make people spend and spend. It now comes down to the buyer discipline. Do you really need to buy it? Are you financially stable to spend that amount of money?
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