WHO IS BETTER OFF: A PERSON USING CREDIT CARDS OR A PERSON
REFRAINING FROM ANY LOANS?
Who is better off: a person using credit cards or a person refraining from any loans?
Technological advancement in the world has led to introduction and propagation of
many payment methods. These methods are efficient since people can make payments from
the comfort of their homes by using credit cards. Credit cards enable a person to use their
bank savings to make payments. One advantage with credit cards is that they allow for
overdrawing, so one does not need a balance in their bank account to make a payment. This
often leads to overspending and poor control of money. Cash payments are therefore a better
economic approach since they foster financial discipline and better financial management.
This paper justifies why refraining from loans is better than using credit cards.
Credit cards purchases and loans are more expensive than cash payments. Credit card
payments attract extra fees in the form of transaction fees and interests (Karbasivar &
Yarahmadi, 2011). When a person makes a payment, not only do they pay the price of your
purchase, but also credit card fees. These extra charges may seem small at the time of making
the payment, but the cumulative cost is high. The credit also accrues interest over time since
money has an attached time value. At the time of purchase, the bank lets a person buy on
credit, but they will have to repay the full amount plus all interest accrued. On the other hand,
with cash purchases, you only pay the price of the good or service. This is cheaper in the long
run.
Credit cards can make a person an impulsive buyer (Wang & Xiao, 2009). With credit
cards, you can purchase anything with a single click. This makes credit cards dangerous
since, at the end of the month, a person might overspend their income or overdraw their card.
Internet usage also propagates impulsive buying due to the advertisements that are all over
the internet. With a credit card at your disposal, you might find yourself making unplanned
and unnecessary purchases which lead to financial indiscipline. With cash, on the other hand,
