Credit Cards Debts
A credit cards debt is a term that is used to refer to the form of unsecured customer loans/ debts in which the customer accesses such credit via the usual credit cards. As a result, the debt culminate in circumstances or rather situations where the customer buys a service or a product using the credit card systems such as visa cards, leading to a loan that the customer is bound to pay within the agreed period of time and at predetermined and agreed interest rates. Consequently, such debt is likely to accumulate and soar due to the increasing interests as well as penalties for defaults in situation where the customer/ defaulter declines to pay the credits card company for the money that makes the debt or rather failure to pay the debt within the agreed period of time.
The interest rates or penalties that are charged on credit card debts either normally or in cases of default is not static thus vary among credit card companies or with time (Dugas 7). For instance, in case where the customer has either defaulted or failed to pay the credit card debt, the credit cards debt company will levy the customer interest and the respective penalty basing on the current such terms and in line with the organizational policies and procedures governing the same. According to Aparajita & Anusha (6), penalties for default and late payment ranges from between $ 10 to $ 40 the latter of which the company will inflict to the customer upon which the respective company is expected to report the delayed payment/ debt default to the respective credit rating bodies/ agencies. This paper reviews the issue of credit cards debts with a bias to the United States of America. Furthermore, it reviews the pros and cons of the credit cards debts.
Credit card debts: empirical facts
According to Dugas (7), statistics have evidenced that the credit card debts are more popular and extensive in use among the highly developed and industrialized countries. In a research conducted by the United States public interest group in 2008, it was found out that the total amounts in credit card debts in the United States was approximately 962 billion USD as at July 2008. On the other hand, the approximate total of in credit card debts among the United Kingdom consumers was estimated at 64. 7 billions Euro as at match 2009, while in Australia, such debts were estimated at 41 billion AUD by the end of the year 2009. In the United States of America, it has been proven that before an average college graduate kicks of his or her after college life such a student in most cases will have accumulated credit card debts amounting to $2000 or even more; a factor the places young American in credit cards debts crisis very early in life. More so statistical results reveal that the mean credit card debts as at March 2009 in the United States of America fell close to 3000 USD. Similarly, the average number of credit cards held and continuously used as at the same time was found to be 2 (Tyson 8).
The credit card debts and the universal defaulters
The most controversial part of credit card debts is the application of the universal default principle. In relation to the credit card debt, the universal debt principles arises in circumstances where in cases of default or delayed payment by a customer to specific lender/ creditor even the other creditors to whom this specific customers owes money in terms of credit card debts increases the customers interest rates despite the fact that he is only a defaulter with only one creditor (Aparajita & Anusha 7). The critics of this practice have often termed it as unfair to the customer and purely a fraudulent move by the Credit Cards Company or creditor whoever is the applicant of the principle. According to Aparajita & Anusha (7), the universal debt principle is the key cause of credit card debt crisis among the credit card users especially in the United States of America and which has made it lose a great extent of popularity among the American consumers.
Credit card debts relief
Prior to the amendment of the America bankruptcy law, it was easier for the credit card debts holders/ customers to get credit card debts relief. Under the earlier bankruptcy laws, it is possible for the customers/ account holders to apply for or rather requests for the relief on the annual card debts interest rates, which are typically known as the annual percentage rates (APR). This leads to reduction in cost/ interest of the credit card debts incurred by the customer. Basing on the results of the survey conducted by the United States public interests group (USPIG) in 2002, it was found out that out of the sample population of fifty respondents and which included American from varied credit backgrounds who had got in touch with their credit cards provider requesting for debt relief, more that half (56 %) had succeeded in getting significantly lower annual percentage rates (Dugas 9). The survey had found out that the APR of the successful applicant had been reduced by 5.53 on average. Also the credit card debt could be cancelled in certain circumstances especially when the account holder is by law proven to be bankrupt. However, amendments on the bankruptcy law steered by the great need to protect the credit companies from the risks arising from the bankruptcy concerns has rendered debt relief and canceling of credit cards debts very difficult (Aparajita & Anusha 10).