http://www.nytimes.com/2008/11/15/business/15citi.html?scp=1&sq=%22credit%20card%22&st=cse
Summary:
This is an article that talks about increasing the credit card rate in the U.S. This is a decision made by the citigroup, and it actually pledged for what they have said in the early 2007. By making such decision, the citigroup said it was due to the difficult market environment, which cut down too much of their profits. Most of the credit card holders’ interest rate will raise when they November statements. As a result, because of the fall of the economy, most of the business are not making as much as before, so one of the ways that most businesses think will help them is by increasing the amount of money that their customers have to pay.
Connection:
In chapter 14.2, we have learned about credit cards. Unlike debit card, people can use credit cards without pay the money in the first place. In another word, when people are using a credit card to purchase something, they are “buy first, pay later”. However, when the cardholder pays the credit card bill, one has to pay an interest on the amount they have used as well. Therefore, the higher the interest rate one’s credit card has, the more one needs to pay; however, the higher the interest rate one’s credit card has, the more money one can use at a time.
Personal Reflection:
In my opinion, I do not think that increasing the interest rate at this moment is a good idea. As everyone knows that we are now in an economy depression, and a lot of people are getting lay off from their jobs. For those people who just became unemployed, they may loss their ability to pay back the bank for the credits sooner or later. Also, some people may think that they don’t want to be in debt, so they would use cash instead use credit cards. As those people keep taking out money from the bank, the bank has less and less money to loan to other people, this may lead to bankruptcy. Therefore, I think that the bank should lower the interest rate which cause more people will use the credit card and save the cash, so that the bank will not run out the money.
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2 comments:
Yes, I agree that banks should decrease interest rates because as we all know, inflation is causing everything to cost more. For now, credit cards may seem convenient and rewarding, but as time goes on, I also think that people will gradually turn back to using cash because they they refuse to pay extra and unnecessary expenses. I also agree with the idea that the bank should be more lenient on the customer's ability to pay their debts either by decreasing their interest rates or by extending their payment deadlines. The banks should really consider the position they are in because if they don't think in the consumer's best interest, they might risk bankruptcy.
I agree with your idea that the credit card rate should remain as it stands. Since the economy is falling and money is becoming troublesome for many people, for the banks to increase the credit rate will lead to the loss of many customers worldwide. I also agree on your point of banks falling short of cash to be availiable to it's customers if the credit card rate decreases and all of the customers start to use cash only, or else the banks will be faced with many bankruptcy problems. In order to prevent this situation from coming into play, banks must either keep or decrease the credit card rates.
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