Introduction
Using credit cards has many negative effects on the financial prosperity of a student. Students having access to a credit card, fail to control their spending habit and showcase increase in financial consumption habits. Credit cards provide simple and convenient services, making students feel that they have access to free cash that can be used to purchase products they like. This feeling stimulates impulsiveness among students and influences their financial condition in a negative way. Using credit cards causes serious troubles for students as they develop huge credit card payments and end up in a financial crisis where they fail to save anything and end paying everything for monthly credit card payments.
Negative Effects
Another major disadvantage of using credit cards is the limited or no savings done by students. Services associated with the use of credit card stimulate students’ spending that is restricted due to lack of cash. Having credit cards makes cash deprived students to pay or buy immediately without having the requisite money with them. Before students realize the negatives of credit card use they are already in a huge pile of debt that involves significantly large monthly interest payments. Believing that debt can be paid back in the future, the accumulated size of debt cuts into their savings and future earnings. Overspending leads to the development of financial anxiety among students as they do not have the financial resources or incoming income to pay the debt back (Limerick & Peltier, 2014).
Many students end up in a risky financial condition as their credit dries up and they do not have the money to service their debt (Robb and Pinto, 2010). As students cannot suppress their impulsiveness, they discover products and services that they desire. Impulsiveness leads to continuous overspending, debt overload, long-term expenses on credit card, and prevents students from financial gains. Credit card companies charge significantly large interests to students for their services. These large interest payments are above the principal amount that needs to be paid back. In the hindsight, a student can save the money paid for servicing credit card debt and gain yearly interest from the bank. Rather, they end up spending huge amounts and pay interest to the bank.
Conclusion
Use of credit card has several negative consequences on students as they not only need to pay huge interest payments and monthly late fees. Using credit card forces students into financial trouble as they spend on products and services that are beyond their purchasing power. The result is seen in their financial condition as students end up in financial crisis. Their financial condition is further jeopardized when they need to pay the principal amount and the interest payment. Using credit cards also have long-term negative impacts too, as students develop huge credit card debt and develop poor credit ratings.
References
Limerick, L., & Peltier, J. W. (2014). The effects of self-control failures on risky credit card usage. Marketing Management Journal, 24(2), 149-161.
Robb, C. A., & Pinto, M. B. (2010). College students and credit card use: An analysis of financially at-risk students. College Student Journal, 44(4), 823-835.
