Credit Card Debts: Causes And Prevention

Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards.

Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.

The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies. Being late on a payment is sometimes referred to as being in "default". The late payment penalty itself increases the amount of debt the consumer has.

When a consumer has been late on a payment, it is possible that other creditors, even creditors the consumer was not late in paying, may increase the interest rates the consumer is paying. This practice is called universal default.

There is NO positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system! But most families don't pay on time. The average family today carries $8,000 in credit card debt according to the American Bankers' Association.

Here are a few videos taken from the Documentary 'Maxed Out':

Causes:

When you pay cash, you can "feel" the money leaving you. This is not true with credit cards. Flipping a credit card up on a counter registers nothing emotionally. If you use credit cards instead of cash you will spend 12-18% more.

Prevention:

Personal finance is 80% behavior. You need to cut out habits that make you spend more. You do not build wealth with credit cards. Use common sense. When you play with a multi-billion dollar industry and you think you're going to win at their game, you are naive. You cannot beat the credit card companies.

-Joel Vergis-

Mobile payment systems in Malaysia: Its potential and consumers'adoption strategies

Mobile payment is the collection of money from a consumer via a mobile device such as mobile phone, Smartphone, Personal Digital Assistant (PDA) or other such device.

There have two primary models for mobile payment: Premium SMS based transactional payments and Mobile web payment (WAP). Mobile payment can be used to pay any number fees of digital or physical goods, such as videos, ringtones, games, wallpapers, books, magazines, tickets and other goods. Mobile payment service is developing fast recently in Malaysia. It will work best in those areas where it can emphasize the core virtue of mobile networks-convenience.

WAP is consumer uses web pages displayed on their mobile phone to make a payment. This process is quicker than premium SMS based transactional payments for digital content and also enables the sale of physical goods.

In the following, some benefit that consumer make payment through mobile payment system:

1. Follow-on sales where the mobile web payment can lead back to a store or to other goods the consumer may like. These pages have a URL and can be bookmarked making it easy to re-visit or share with friends.
2. High customer satisfaction from quick and predictable payments
3. Ease of use from a familiar set of online payment pages

The application of pre-paid cash card for consumer

Pre-paid cash card is a card that works exactly like a credit card, but in condition that money must be deposited or reload in it first before using. This allows customers better monitor and budget usage. Pre-paid cash card included debit card, prepaid credit card and stored value card. A debit card is issued by a bank to allow consumers access to their funds without going to bank. Debit card can be multipurpose, customers can use it as payment method at merchant locations or ATM card for withdrawing cash. Stored-value card is similar with debit card, the major difference between debit card and stored-value card is debit cards need a bank account and usually issued in the name of individual account holder, while stored value cards are anonymous. The value associated with the card can be accessed through using magnetic stripe, RFID or enter code number. An example of stored-value cards is Malaysians’ Touch & GO cards.

Application of pre-paid cash card for customers

• Those customers who have poor credit record may not be eligible for credit card but they are able to apply for debit cards.
• Paying bills.
• Safer for consumers for bringing a pre-paid cash card rather than carry cash.
• Visa and MasterCard are worldwide.
• Don’t worry about paying a credit card bill and avoid incurring any debt.
• Anyone who over age of 18 is qualified to apply debit and be accepted without fulfill the qualification of applying credit card.
• Easy to reload or deposit eg. Through online, mobile money or any ATM.
• Withdraw cash from ATM.
• It is suitable for Internet transaction. It provides customers convenience to make purchases online.
• Parents could better manage their kids’ financial problem by limited amount in the debit card as well as provide convenience to younger people and avoid getting into debt.

Electronic Currency

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Definition:

money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it.

Many systems will sell their electronic currency directly to the end user. Some examples are such as Paypal and WebMoney, but other systems, such as e-gold, sell only through third party digital currency exchangers.

Some examples of Electronic Currency:

1. PayPal




2. neteller




3. WebMoney





4. Google Checkout






5. Microsoft Points








Global Digital Currency Association

The Global Digital Currency Association (or GDCA) is a trade association of electronic money operators, digital currency exchangers, merchants and users.

Future evolution of E-Currency:

The main focuses of digital cash development are

1. being able to use it through a wider range of hardware such as secured credit cards; and
   
2. linked bank accounts that would generally be used over an internet means

Theoretical developments in the area of decentralized money are underway that may rival traditional, centralized money. Systems of accounting such as Altruistic Economics are emerging that are entirely electronic, and can be more efficient and more realistic because they do not assume a zero-sum transaction model.

Issues/Problems Faced:

The transfer of digital currencies raises local issues such as how to levy taxes or the possible ease of money laundering. There are also potential macroeconomic effects such as exchange rate instabilities and shortage of money supplies (total amount of digital cash versus total amount of real cash available, basically the possibility that digital cash could exceed the real cash available). These issues may only be addressable by some type of cyberspace regulations or laws that regulate the transactions and watch for signs of trouble.

-Joel Vergis-