Chapter 12 -The End of Credit Card Consumerism

http://www.usnews.com/money/business-economy/articles/2008/08/08/the-end-of-credit-card-consumerism.html

SUMMARY

Over the past couple of decades; the United States, a shopaholic nation has had a craving to spend until their credit cards are melted. Throughout the past four decades consumer spending has been increasing and becoming a huge share of the total economy. In 1965, the consumer spending in the U.S. economy was just a little more than 60 percent and now it has risen up to 70 percent. It may seem that there is nothing wrong with consumption (especially with the most productive economy on earth). Well now there is a slowdown in the economy and the in inflating prices of goods and services. Since the economy has come to a turning point, there was no choice, but to cut back on their spending. Since the year, 2000 total credit card debt has increased more than 50 percent. Excluding mortgages an average American who has a credit file is in around $16,635 in debt. With the inflation of gas and food prices will probably cause the Federal Reserve to start increasing interest rates. In one survey it was found that people rank being in control of their finances and living in greener lifestyle higher as signs of success than having money or a luxury goods, and view paid-off mortgage as more of a status symbol than having a beautiful home.

CONNECTION

The connection that is in this article and chapter 12 are with the down turn of the economy fewer companies would prefer costumers using credit cards because cash provides a safer insurance; even though the use of credit cards are much more convenient for the average person. Although some credit card companies offer cash discounts for those who are able to pay the full bill within a certain date, there is a high chance of consumers cutting down on the use of credit cards due to more companies wanting to collect payments in cash. For example, I have found that there are gas stations who would offer special discounts for consumers who paid in cash. http://www.creditcards.com/credit-card-news/gas-discounts-for-cash-1275.php With companies who offer discounts for consumers to pay in cash can cause the credit card companies to lose a great amount profit. The cash discount that the credit card companies offers is to ensure that they will be able to get some of the money that their costumers have spent. The cash discount can also help consumers to use credit cards because if they pain within a time frame, they can save money. With the companies offering lower prices on their products, should the credit card companies increase the cash discount to maximize and to ensure the consumer’s use?

REFLECTION

In my opinion, I think that cash discounts is a great way of getting people to pay earlier and it also helps to keep customers to come back. Even though cash discounts helps credit card companies to get their money back earlier I think it is important for them to increase the rate of the discount due to the high demands of paying in cash of the retailing companies. Since the economy has came to a down turn more and more companies want to collect cash as paying, which would make sure that they had enough money to keep their business going. The credits card companies are still able to make great money due to the continuous increase of consumer spending from 1965 to present there was almost a 10 percent increase. They just have to think of ways to keep consumers using credit cards.