Problems in The Use of Credit Cards and Consumer Credit

The use of credit cards in modern life would have been impossible to separate. This was developed along with advances in technology, information and an increasingly modern human civilization, which requires ease in any business.

The growing use of credit cards backed by the growing access to credit card usage in any business activity in places of shopping, as well as the needs of modern society to be able to enjoy a sophisticated payment system and simple.

However, excessive use of credit cards can cause serious problems for customers, as well as for the credit card issuer.

Problems in the use of credit cards by customers to watch out for:

First, customers usually do not know exactly the complicated calculation of interest, which is charged by the bank. Customers also need to be more critical in accepting the offer of 0% or low interest, if able to pay at maturity. This is because the interest is usually charged after the due date will be higher than average interest rates.

Second, the customer should know for certain financial capability. What is the financial side they have been able to use a credit card or not!. Furthermore, customers also must understand that the cost of interest and fees charged on credit cards are usually higher than interest rates for working capital or investment. So they already know before borrowing interest charges and fees to be borne.

Third, the customer should know his personal character in managing finances. If they feel that their personal financial management is very bad, the excessive use of credit cards will jeopardize their financial future. It is getting worse, if the use of credit cards is more emphasis because of life style reason compared to the rational use of precaution.

Finally, the Customer must understand that excessive use of credit cards can lead to problems of the risk of fraud. This may happen in case of internet use, or use the small merchants of doubtful credibility.

Of course, vigilance in the use of credit does not mean that you refrain from the use of modern payment systems, such as credit cards, because of the advanced payment system is also has benefits in business activity.

However, the use of a blind, without constituted with the understanding, ability and good character, not only will hurt yourself as a customer. But also would jeopardize the issuer or bank credit card expenditures. And, Improvement and financial system in general.

Furthermore, precautions should also be enhanced by the issuer of credit cards or bank management, which now began to reap the promised benefits in consumer credit. Increased levels of market penetration of credit cards, driven by advances in information technology, which allows the assessment of clients in a short time using sophisticated credit scoring models. This technology is generally able to capture the motivation, financial situation and the economic one, which reflects the feasibility of getting a credit card.

However, it should be understood even though interest rates consumer credit is higher than the interest rates for working capital and investment, but that does not mean it does not have the credit risk of large losses as well.

It should be understood by the issuer (bank management) to avoid the risk of default or unpaid credit card bills, is that the NPL (non performing loans) or the breakdown of consumer credit payment in general is closely related to the business cycle of an economy . Where if the economy is experiencing growth and development, then the probability of default will be smaller. Conversely, if the economy is experiencing recession or decline in economic performance, then it is certainly the possibility of default or the NPL will be higher.

On the other hand, consumer credit has a high risk and high costs. First the high risk of consumer credit is closely connected with the financial condition, economic person or family. So if the customers affected by a severe illness, lost jobs or suffered a tragedy or an accident, it will affect their credit payments. Second, the high cost of consumer loans associated with a small nominal amounts, thereby increasing the high transaction costs for banks.

In this context, the proper asset management need to dilakukkan by bank management, with no dominating credit penetration in the consumer credit. Differentiation and anticipation of risk should still be taken into account in order to increase profits and control the risks that are not harmful to the banks.

For customers, the use of credit cards and consumer credit proposal still must be considered carefully expediency and cost. So that decisions do not harm its financial position in the future.

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