I was having this discussion yesterday (Tuesday) night, and it started to become tense because of the way it was being dragged and I thought to myself I might as well post it here to see what the others here on the web would think and reply back to the issue.
So here goes..
The issue in discussion is about credit cards. Someone I know (who started the whole flamengo) was just employed recently for a company that issues it's own credit cards and it has it's own bank and banking system. And he was flattering the company because it was of an American origin and he never liked American products or services (because he himself is a Palestinian) - but that's besides the point that is being made here.
The point that I am trying to make here is that he went on about how only mature people can recognize the special treatments that included with having a golden or a platinum credit card.
Having heard that, I tried to move in with a few questions such as why would anyone in the world need a credit card, even though they have the unreasonable highest interest rate in the world over?
I believe that the credit card scheme has been over-valued all over the world because the very concept of the whole system is manuplative. You are lured in to get a credit card for your account in your specific bank with all the glimmer glamour that camouflages the actual truth behind it.
You get free tickets, free treatment at VIP airport lounges, free drinks at a certain restaurant, free discounts at some international hotel chain and the list just goes on and on and on. And for what? So that you end up taking a loan on your account that you have to pay back in time and if you don't you have to pay it all including a daily interest rate?
I am talking about the relegious point of view here that states that this very transaction that has maddened the world's economic population wildly thus increasing it's growth in the very terms that Islam says it is prohibited because it is basicly an act of riba - whereby you are taking a loan on something you don't own and have to pay it back with an extra fee.
From a logical point of view, why would anyone want to get into the never ending maze of paying for a scheme which in all honesty laughs in your face and plus charges you extra fees should you want to pay the amount later on?
Why?
Why put yourself into this position in the beginning? The world does not revolve around squandering money here and there. Although it may feel nice to actually buy some new stuff every now and then. But why should you be worried later on about how you're going to pay the amount?
And how does this all link to maturity?
I await your answers..
Thursday, March 09, 2006
Credit Cards & Maturity
Posted by Sleepless In Muscat at 00:27
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5 comments:
I am on the other side of the issue here. Credit cards can assist greatly with cash flow management; it’s more about how to use debt wisely. However, as with everything else in life, moderation is Key.
Also, if disciplined enough, one can purchase all items on credit, take advantage of the incentives and pay off the balance at the end of the month. It’s a problem when more is spent than can be paid off, its not free money in fact as you stated very expensive money.
My point is a credit card is an asset to the disciplined individual.
per your request:
i never said it was free money, i said it was money which you take from the bank that covers that amount in your bank account but you would have to pay it back with interest..
why should you take a loan on something and pay it back with an interest? it just doesn't make sense whatsoever..
plus i fail to see how it keeps cash flow going within a certain cycle. if it does, then why does half the people on the planet that own a credit card end up in jail?
and i still don't understand further on when you say "My point is a credit card is an asset to the disciplined individual" .. if that's the case; then what are debit cards, for those who can't handle it?
I am sorry but I fail to agree with many points and attributes of the so-called credit card scheme
Ali,
Most credit cards do not accrue interest before the end of the cycle or at times as long as 30 days after using the credit card. The clock does not begin ticking the second the card is swiped.
In regards to cash flow, let’s assume a car breaks down, and like most people, you don’t have the savings to pay for it, a credit card would be a helpful tool in this case. Of course the fiscally disciplined would adjust their outflow at the beginning of the next cycle to pay off the balance. Assuming the balance is too high to payoff in one lump sum, then yes one would accrue interest. However transportation to work and back was not jeopardized.
Debit cards are used as a direct withdrawal from your bank account. Therefore you must have the funds available to utilize a debit card. Debit cards have become more popular with E-commerce, and are an alternative method of payment but not a substitute to a credit card. Debit cards are just another means to access your bank account.
Finally, interest rates are an important part of any economy. And banks make money on interest. Actually other than service fees, the majority of banks income is from interest. Banks that don’t charge interest will replace it with higher fees, and junk fees. If we call it a different name, does it really mean we are not paying interest?
Im curious to know more about why credit card companies would remain in business if 50% of their customers are in Jail? Do they ever get their money back? Or are you assuming this is a fact?
Ali:
Per your request is totally correct.
The bottom line is that the banks could not survive without making money off of the interest (there are so many people who do not manage their cards correctly - hence the maturity issue). And the banks know the way the land lies, how society in general strive for bigger, better, newer goods; materialism at its best. The banks are also fully aware that the vast majority of people do run up huge debts just like you say.
If you think about it really a customer with a large credit card bill, who only pays off the interest once a month, is actually their best customer! Crazy, ironic but very true.
I am sad to say but that really is the way it is, eventhough that does not make it morally right irrespective of any particular faith.
I have other opinions on the matter and I still think that it is the wrong way to go about in the economic whirpool. But I will stand my answer right here. So I am not going to add any more heat to the arguement at hand.
Sorry..
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