Pestel Factors Affecting Credit Card Industry

James D Scurlock’s “Maxed Out” focused on the revolving use of credit cards to charge now and pay later and the fact that once the credit card was maxed out another one was sent from the credit card companies and the whole process begins all over again. Scurlock’s essay made the reader aware of the downfalls and hardships that can occur when credit cards are constantly used for purchases compared to Kevin O’Donnell’s “Why Won’t Anyone give Me a Credit Card”.

In the early 1980’s the conservative government headed by Margaret Thatcher, began to liberalise the financial industry. This promoted more competition between firms to attract customers, and offer credit facilities to a wider range of consumers. Companies used aggressive marketing to attract customers, but the amount of different products available on the market to customers made it confusing, and many took on loans and credit cards without fully understanding the product they were buying, or the interest rates they would have to pay. This resulted in a wider range of consumers having access to buying goods on

Richard Fairbank and Nigel Morris, both diligent entrepreneurs, started laying the bricks for their eventual successful company, Capital One, in the late 1980’s. They both worked in the Virginia-based “Signet Bank”. Fairbank started noticing trends in the financial industry that he felt Signet was missing out on. These opportunities were in the credit card industry. He, as well as all of Signet Bank knew that the credit card industry was very risky, but Fairbank was ready to take a chance in this, what can be, highly profitable field.

Attitudes about spending changed drastically. At this point, more people had access to credit cards because credit card companies stopped limiting their customer base to the wealthy, and began issuing cards to people with moderate to low incomes (Garon, 2012, CNN World). This gave Americans a way to purchase goods and services immediately, even if they didn’t have the cash on hand. The seven to eight percent savings rate maintained in the United States from the 1960s to the 1980s plummeted to less than two percent, and remained so until the first decade of the 21st century (Melicher & Norton, 2014, p. 168).

Not only for those seeking to retire, the business motivated economy has transfigured how one must live in order to live comfortably. Building credit through credit cards is often perceived to be the only way in order for a buyer to appear credible. Yet in the quest for the optimal credit score people enter into debt. Considering and evaluating the risks and benefits to credit cards may contribute to opinions towards those flimsy pieces of plastic.

Credit card debt is one of this nation’s leading internal problems. When credit was first introduced, and up until around the late 1970’s, the standards for getting a credit card were very high. The bar got lowered and lowered to where, eventually, an 18 year-old college student with almost no income and nothing to base a credit score on previously could obtain a credit card (much like myself). The national credit card debt for families residing in the United States alone is in the trillions (Maxed Out). The average American family has around $9,000 in debt, and pays around $1,3000 a year on interest payments (Maxed Out). Many people have the concern today that these interest rates and fees are skyrocketing; and many do not

The Federal Reserve statistics indicate that the average U.S. household has a credit card balance of $7,283 while the average indebted household has an outstanding balance of $15,611 (Bricker, et al., 2014). Only home mortgages and student loans exceed credit card balances. If consumers hope to create an appropriate level of wealth to support themselves in the latter years of life and avoid counting on government programs as their primary source of income, consumers will need to save more of their income. Servicing credit card debt required approximately 13.9% of consumer’s disposable income in the fourth quarter of 2008 (Wilcox, Block, & Eisenstein, 2011). If these dollars were available as contributions into a retirement account on behalf of the consumer, countless people would be confident about their ability to save for an appropriate lifestyle in retirement. The abuse of credit card usage may be caused by a lack of spending discipline, lack of information or a lack of financial literacy, or a combination of the three. These shortfalls are examined to determine if policy makers can intervene to motivate consumers to generate improved decisions regarding the use of credit cards. The first step in this process is having a basic understanding or knowledge of financial matters. The need for improving financial literacy in America continues to grow as financial products and services continue to become evolve in complexity. The Great Recession has recently proved that financial literacy in this country has room for improvement at all economic levels. The CARD Act required The Secretary of Education and the Director of the Office of Financial Education of the Department of the Treasury to coordinate with the President’s Advisory Council on Financial Literacy to develop a strategic plan to improve, expand and support financial

Consumers use credit cards for numerous reasons. Those reasons are: the earning of cash back, safety, points and frequent-flyer miles, universal acceptance, and to build credit (Investopedia.com). Credit cards can allow for cancelations a payment on a service that did not meet the expectations of the consumer, which is really beneficial. However, consumers own a few too many credit cards that all have different interest rates. The reason credit debt is so astronomical, is because consumers are paying the required minimum payment

In the world of personal finances, credit cards play an important roles in lives of many people. Sometimes, it's out of choice while other times it happens out of necessity. Regardless of why it happens, the numbers surrounding credit card debt are worthy of scrutiny in order to determine whether having or using credit cards is a sound financial decision.

Many of our time rely on credit and debit cards when purchasing items. While the two seem identical to one another, failure to know the difference can result in an economic catastrophe on the card owner's part. Debit cards are used as a way to spend money that the consumer already has by withdrawing the purchase amount directly from their account. On the other hand, credit cards allow the card owner to borrow money from the bank, in which the card is issued, up to a certain amount in order to make a purchase which they will pay back to the bank at a later date.

Plastic money is in vogue in today's economy. Paying for what you buy through your credit card is fashionable and convenient. But credit cards are growingly becoming a matter of immense concern thanks to the problem of card debt. The problem of credit card debt arises when consumers buy something swapping their card but are unable to repay the money to the card company within the stipulated time period.

In response to the Credit CARD Act’s intent on fighting against young consumer perdition with debt, new credit card usage has been halved by those aged 18-20 . It is possible that the halving may not be completely related to the Credit CARD Act, and could possibly stem from the recession itself. However, it has played an important role in reducing unnecessary credit for young consumer. The application process has become somewhat prohibitive. That serves, in effect, to limit the amount of people who will try to obtain credit through credit cards. The goal is to limit acceptance for young consumers who find credit to be necessary and feasible.

One of the first rules in using a card is to use credit instead of debit. What people don't know is that credit cards offer a higher consumer protection against fraud. What makes it better is that many of them come with zero-liability

Once payment in full was received, the consumer took the goods home. Thus, if the consumer did not have the money, they could not purchase the goods. However, during the boom of the late 1990s the number of households with a credit card was significantly higher. In 1998 the number reached 68% (Durkin, 2000). By the late 1990’s, any college kid with the hope of becoming an educated contributor to the workforce could get a credit card with at least a $1000 limit. Personally, my first credit card had a $1000 limit and did not require my parents to co-sign. I got it in 1996 as a freshman in college.

Whilst a critical part of consumer spending, credit card companies are constantly accused of malicious legal contracts and schemes to increase profits. Without heavy regulation, these companies have the power to bankrupt millions of Americans that rely on credit cards in their daily lives. However, after the introduction of The Credit Card Act of 2009, these accusations represent an inability to accept responsibility for financial blunders on the consumer’s behalf. Due largely in part to the government’s strict regulations, credit card companies should not be at fault for the student credit card debt crisis. Credit card companies remain blameless for student credit card debt as a result of