Effects of Credit Cards

Topics: Debt, Credit card, Credit Pages: 4 (1489 words) Published: April 13, 2009
The introduction of credit cards has been a modern method for monitoring and controlling transactions, which were previously, conducted using cash. “ A credit card is a transaction tool, one which gives customers the opportunity and ability at the point of sale to decide whether they want to pay for the purchase over a longer payback period, pay it in full or pay a portion of it at the end of the month.” (Jackson, 2008) Credit cards have replaced cash in most markets and trading places in the United States. The credit card has had both a positive and negative effect on the economy. On one hand, they have increased the activity and transactions taking place in the industry, while on the other hand they have also increased the level of debt owned by the people in the market. Before plastic, we could not buy anything without making sure we had enough money in our wallet or in our bank account. Credit cards have made it easier for us to buy, without thinking first about our income, bills and future expenses. They have made it much harder for us to make a distinction in our minds between ‘want’ and ‘need’.” (Block, 2001)

One of the main benefits of credit cards is the fact that people can buy the things they want today and pay for them tomorrow. Economically speaking this increases the disposable income for the consumers in the short run with the ability to finance their purchases. The presence of credit cards has driven consumers to a ‘shop today and pay later’ strategy. That has lead to an increase in the income or funds available to consumers for them to increase their monthly spending (Leader, 2007). After all, consumers make up tow-thirds of the economy and they must keep spending to keep the economy strong.

As mentioned above credit cards tend to increase the income or money available to consumers. The increase in income and funds available increases the consumer’s consumption activity. “Essentially it is how much of every discretionary dollar...
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