Credit Cards and Banks Term Paper

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In summary, I feel that I have learned to use a credit card in a way that benefits me more than the merchant or the bank.

For other consumers increasing reliance on electronic payments may be a problem, especially for the newer and lesser understood debit cards. There appears to be certain classes of consumers that view a plastic card differently from actual cash or that purchase more because it's easier to do so. The rising credit card debt problem in the United States is already a frequently covered issue and debit cards may be the next item of discussion. Debit cards may make the consumer debt problem worse by extending electronic payment access to customers who don't qualify for credit cards. Unlike credit cards, debit cards require the cash to be available in an account, but it doesn't mean that this cash wasn't earmarked for other necessities. And, it is possible to dip into an overdraft line of credit tied to your checking account. One has to wonder if the growing use of debit cards will also fuel greater use of credit cards as cash is drained from accounts by more impulse purchasing.

As more consumers turn to debit cards, banks may well devise strategies to eek more profit from them.

One reason is that banks will not want to lose credit card revenues to debit cards.

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Most banks do not now charge consumers transaction fees for debit card purchases. However, this may change as was the case with ATM transactions that were initially free. Over time, banks started devising schemes to charge ATM fees such as requiring minimum balances to avoid the charges, etc. Just like credit cards and ATMs, the consumers that will get hit the hardest with fees are those that can least afford it.

There's certainly nothing wrong with using electronic payments as substitutes for cash and checks to pay for everyday items such as gasoline, groceries, restaurant meals, and department store purchases. The problem occurs when consumers spend more money than they can afford to do so and/or pay ridiculous fees for electronic transactions. Debit cards don't pose any new problems that credit cards haven't already presented. The problem is that there's already a huge class of consumers that have problems using their credit cards responsibly and now debit cards extends the issue to a broader class of consumers......

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