Credit cards are technically instruments of debt and are now imbedded in our society. Credit cards represent huge business to a variety of industries, namely credit card networks, credit card banks and merchants that accept the credit card as payment.
Credit cards are heavily marketed. Credit card banks and credit card networks seeking to entice merchants to accept credit cards, and consumers to use credit cards spend an estimate of 50 billion dollars every year. It is difficult purchasing anything on-line without a major credit card. Most major retail outlets as well as restaurants, airlines, hotels, and fast-food restaurant prominently display the primary and competing credit card networks: MasterCard, VISA, American Express and Discover.
To the credit card networks, the credit card represents a payment vehicle. They charge the person that accepts the credit card as payment a transaction fee. The more transactions cross their network, the more transaction fees they earn. Hence they market to merchants and encourage the consumer use of credit cards for daily transactions boasting security and convenience as opposed to cash or checks. The credit card networks market their services to merchants (stores, restaurants, service providers etc.).
The marketing material targeted at merchants was found to contain specific measures of consumer spending when credit cards were involved in the purchase. The fact is consumers spend more when they use credit cards than when they use cash, checks or debit cards. We even found a lawsuit brought by a major retailer against a credit card network for charging the same transactional fee on debit cards or check cards as credit cards. The lawsuit specifically argued that charging the same fee for a check card or debt card was unfair because consumers using debit or check cards spend less than those using a credit card.
Credit card banks, the credit card represents an instrument of massive consumer debt and massive earnings from interest. The credit card division of major banks is typically the most profitable. The credit card banks use the same benefits as the networks, (convenience, security) but also include the super low monthly payment, an improved lifestyle, and the status symbol of the card itself. Many credit card banks offer low introductory (temporary) rates to entice consumers to transfer balances from other cards.
For consumers, credit cards offer a convenient and secure alternative to cash. Credit cards also offer an increased ability to spend. For the disciplined consumer, credit cards can represent a valuable tool to manage their personal finances. For the undisciplined, or in cases of illness, injury or loss of income, credit cards can become a financial nightmare. Credit cards are, by far, the most common debt instrument that results in consumer insolvency and bankruptcy.
