Friday, June 2, 2023

Credit Cards and Bankruptcy

The inevitable trap of credit cards and banks preying on their victims can drive many into bankruptcy. There is no easy way out of financial situations when income does not match expenses. We all want the latest and best things in the market and many people get them through loans on those pieces of plastic. However, the fact that the interest charged can mean that repaying such loans makes it out of reach to meet.

Banks are not honorable enough to surrender their biggest money earners, namely credit cards. Those who use them are ‘cash cows’ that provide huge income and huge annual profits to their lenders. It is like gambling when one puts in money and gets little back in return.

In the past I too was addicted to credit and then some valuable lessons came my way. The stuff I was buying during the sale, and beyond, was double what it would have been if the same item had been bought with cash. Not only that but a lot of stuff stuffed in my cupboards was unnecessary and would probably never be used.

Banks and sales go hand in hand. It is often seen that stores give extra discount on using Visa card. It doesn’t take a genius to figure out how much the business gets back for this modest deal. Nor does one need a calculator to check where institutions are making most of their money.

Interest on property loans has never been lower in Australia than at the moment. Anyone can get a mortgage for 1.5 percent or less. This is because banks know that if they go bankrupt using their credit cards, people will be forced to sell those assets at a huge loss. Keeping this in mind, the loan extension is offered to the mortgagor.

There is a ploy here to force banks to disclose the source of their income while the opposition wants a Royal Commission into banking practices. This is long overdue with the media focusing prominently on the ongoing link between credit cards and bankruptcy.

The best way to avoid the trap is to tear up the cards and have nothing to do with them. Deals only happen when shopping results in real savings. Buying things for cash will soon become a priority if money is managed properly.

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