In this episode of
Money Creation Explained, we are going to cover How Credit
Cards Bonus Points, Airline Miles, and other Special
Promotions are Sophisticated Traps to Keep People in Debt.
Everywhere we turn in society whether it is TV, Internet,
Prints, Direct mail, In Store, and the like we see
advertisements from credit card companies trying to get us
to sign up. You will see terms such as no annual fee, cash
back, reward points, bonus miles, no intro or low APR for
intro, protection benefits, etc. These perks all sound
great, but they are really a carrot that credit card
companies use to lure consumers to signup. Most people do
not have financial discipline and live beyond their means.
Once the introductory period is over, Credit Cards have high
interest rates that go up to 29% APR (Annual Percentage
Rate) plus late and other fees. Many people fall into the
credit card interest trap of just paying the minimums. Once
in debt, it is difficult to get out.
Before credit cards, people made wiser decisions with their
money and were also able to save more. This was due to the
fact that every time a purchase was made, real money needed
to be exchanged; cash and checks which represent funds being
deducted from a person’s bank account, so people were
trained to make wiser purchases. After credit cards became
the norm, people got lines of credit that represent money
that could be paid back later. For someone who is good with
finances, credit cards are a good option, but for people who
lack financial skills, credit cards are the easiest way most
people fall and stay in debt.
An alternative to credit cards are IOU Notes which is a
peer-to-peer credit and loan platform. It is not based on a
person's traditional credit score (FICO), but rather on
their IOU Credit Report and their ability to pay others
back. Every user on the IOU Notes platform can decide who to
give credit and/or lend to, how much and the terms (1- 24
months), and (0% - 5% interest rate).
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