Credits card
Credits card has both merits and demerits. Therefore, a well defined strategy should be worked out before the first credit card is used.
Credit cards are very easy to operate and to get. Most people are requested for pre-approved credit cards many times each year.
They make available immediate credit with tens of thousands of merchants.
You can get cash immediately at any branch of the provider.
Most allow cash advances.
It provides good profits for the banks.
Introductory rates will be very less.
It is one of the first financing sources in the company's name.
It helps to increase overall business growth.
The credits card is not risk free and all players associated with it have to face an element of risk associated with it.
The card owners are burdened with service charge, annual fee, membership fee, etc. A high rate of interest is charged for delayed payment. A minimum of five to ten percent on monthly purchases apart from the additional charges are to be paid in case the consumers postpone the payment beyond the stipulated credit period. According to a recent survey, sixty five percent of card owners are ignorant about the high interest charged on outstanding balance.
Credit cards tempt the owners for more purchases beyond their income and repaying capacity.
The cost involved in the credit card business if high which include cost of plastic card to be imported, cost of information, cost of placing and marketing cards, cost on staff to monitor processing of applications and to carry out credit checks on applicants etc. Unless the number of card owners and the volume of business is high the credit card business will not be a profitable one.
The menace of frauds perpetuated by owners of bogus cards and sometimes in collusion with the member establishments is the major problem for the issuers.
The average utilization of credit card is only twenty percent to thirty percent. The underutilization of this facility erodes the profitability of banks.
The commission to be paid to the issuing banks or credit card organization is heavy.
Some banks make delay in payment due to lack of adequate system and trained personnel which affect the cash flow of the member establishments.
To conclude, before taking credits card you should know the merits and demerits of it thoroughly. These credits card is like a passport which is very essential to purchase varieties of goods and it is very safety while traveling as well as to withdraw money any where all over the world.
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