Credit cards have become one of the most commonly used means for daily financial activities. They are used for everything from buying breakfast, to getting gas, to paying the power bill. Some people use them for the rewards and others for a stream of cash until the next paycheck. While some people pay the balance off monthly, many more have some significant amount of debt from one or more credit cards. In fact, the average credit card debt per U.S. adult, excluding store and zero balance credit cards is $4,878. Recently, the amount of credit card users soared to around 77 percent of adults, making the number of credit card holders higher than the number of individuals with vehicles. And it is not just one card per holder, the average person has 3.75 cards per credit card holder. Credit cards have truly become a necessity in many adults’ lives. Since 1958, when first credit card was issued for general use, the amount of users has climbed. This card allowed user to pay their balance over a period of time and was called the BankAmeriCard until 1977, when the name was officially changed to Visa. Since then, major credit card companies such as Visa, MasterCard, Discover and American Express have been doing everything they can to draw in users. Consumers are drawn to the convenience that comes along with holding a card. This can be anything from easy record keeping, to building credit, to security.
The concept of lending money through a card or can be traced all the way back to the 19th century. In the earlier days, department stores were known for awarding their most valued customers with a form of credit printed onto an identification card. Shortly after the Visa card was officially released, a network of bank owners created the credit card that we know today as MasterCard. MasterCard’s arrival was due largely to the amount of success that Visa was having. Following shortly after, the other major credit card companies started to pop up. As the popularity rose, the credit card industry became the subject of much debate. Many felt that the restrictions were too low and the fees were too high. To top it all off, many people using credit cards were unaware of these details since they were written in the fine print that typically went unread. This left consumers with unexpectedly high bills and debt that they were unable to afford. Between the 1970s and the 1980s deregulation within the industry was blamed for many of these problems. That continued to be the case until 2009, when the United States President Barack Obama signed a bill to put an immediate stop to the notorious credit card practices. This involved putting a stop to interest rate hikes, marketing to college aged students and excessive penalties. While it did not completely solve and stop all of the problems, it significantly cut back on the amount of problems that people had.
A good way to think of a credit is to think of it as borrowed money. The amount of money being loaned to you varies based on the type of card, your credit score and many other factors. For example, a low credit score would have a lower credit limit but higher interest rates. After you spend the money it must be paid back in the agreed period of time, if it is not, then you will begin to accrue interest that must be paid in order to pay down the principal, and continue to use the balance on the credit card. This type of credit is called revolving credit. Regardless to the specific credit card that one obtains, issuing a card is based off the individual’s ability to pay back the money that is loaned out. Lenders tend to be much more cautious when loaning money to risky borrowers since the money is unsecure. Recently, states have seen a decrease in credit risk due to the rising economy. Credit card repayment doubt still remains a problem for specific demographics. For example, woman are more likely to carry a credit card balance than men and 65% of people aged 50 and over pay their balance in...
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