Credit Card debts: Causes and Prevention

Credit card is a small plastic card issued to users and allowed the users to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1.

Besides that, unsecured consumer debt is an example of credit card debt, accessed through credit cards. Debt results when a customer of a credit card company purchases goods or service through the card system. When the customer does not pay on time for the company for amount of he or she has spent, debt can be increases and accumulates through interest and penalties. As a result, this debt will charge for a late payment penalty and report the late payment to credit rating agencies. Moreover, the late of payment sometimes referred to as “default” and the late payment penalty itself increases the amount of debt the consumer has.

Nowadays, credit card debts become serious problem. There are several causes of credit card debts will be discussed in the following:

1)Poor money management
Poor money management is one of the causes of credit card debts. It is because if credit card users purchase something without spending plan then will lead to overspend. Thus, it will rise and accumulated credit card debts.

2)Gambling
Gambling is a one of the entertainment and it can become addictive, so it will be hard to stop. Therefore, it will be lead to a financial disaster if borrowing money through credit card for gambling.

3)Unemployment
If people who are unemployment, it will lead to those people use credit card for their utilities, groceries and any expenses purpose to support the main breadwinner. Thus, it might lead to increase credit card debts.

4)Medical expenses
Credit card can be used if family member suffer serious illness. It might be health insurance can’t cover the medical bills. So it will lead to use credit card is one of the ways to settle the bills. Thus it will increase credit card debts.


This several causes of credit card debts will create a huge of credit card debts for user. So credit card user should take some ways to prevent credit card debts. There are some prevention credit card will be discussed in the following:



1)Limit what you use your credit cards for
Limit use credit card is a good ways to control your credit card debts. Do not always using your credit card to make daily purchases like groceries. If you prefer not carry cash around you can get yourself a debit card which works the same as a credit card, however, it is direct cash purchases. You are not charge often times to use these and you are using cash to make your purchases. Keeping your credit card debts under control is not easy for some people but we can all learn to avoid the many pitfalls that we all get used to falling into.

2)Always set up a budget
Before using credit card to purchase something, you must have make budget for yourself to estimate your spending. It will prevent you from overspending and fall under deeper debt load.

3)Keep your credit cards to a limited number
Try to keep your credit card as few as possible. It is because most of the people who have mounting credit card debts are having this problem because they have too many cards in the first place. If you want to have a card that you can use everywhere, try just having a Visa, MasterCard, or others card which are all used everywhere.

4)Avoid making any purchases during peak seasons
Try to prevent making any purchases with credit card during peak buying seasons such as Christmas and New Year. It is because they know that everyone is buying more items with their credit cards. So credit card companies will charge you more interest during these peak seasons. Most of these companies will not make a point to tell you this, but they make a mint off of us at these times.


References:

1. http://en.wikipedia.org/wiki/Credit_card
2. http://www.google.com.my/search?hl=en&q=credit+card&meta=&aq=f&oq
3. http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp
4. http://www.surfinthespirit.com/debt-consolidation/creditcarddebt.html
5. http://www.creditcards.com/credit-card-news/5-steps-eliminate-credit-card-debt-1267.php
   

The Application of Pre-Paid Cash Card for Consumers

People who have problems with staying on budget is better for them to use a pre-paid cash card. It works just like a credit or debit card except that a person needs to load the card with money first before a person can use it. By doing this, a person can know how much money he or she has to spend as well as how much a person have spent. It can lead to a better money management and the user won’t get into a credit card liability.

In Malaysia, we have a pre-paid cash card so called Touch ‘n’ Go card. It is an electronic purse that can be used at all highways in Malaysia, major transport in Klang Valley, selected parking sites and theme park. The card looks similar to a credit card. User can continue using the card as long as it is pre-loaded with electronic cash. User can reload the card at toll plazas, train stations, Automated Teller Machines, Cash Deposit Machines, Petrol kiosks and at authorised third party outlets. Touch ‘n Go enhances the speed of paying for low value but high frequency transactions and it is very convenient because user no longer need to prepare for small change or wait in queue at the cash lane to complete the transaction.

The Touch ‘n’ Go card can be used for ticketless parkings at Kuala Lumpur area (Bangsar Shopping Mall, Sg. Wang Plaza, Pantai Medical Centre, Megan Avenue I & II, Ampang, etc), Petaling Jaya area (1-Utama Shopping Centre, Kelana Square, Armada Hotel, Selangor Turf Club, Assunta Hospital, Jaya One, etc), and other area like The Summit, USJ, Sunway Pyramid, KLIA, Century Square, Cyberjaya and other places that have implement this system. Besides that, the card acts as an alternative in paying its admission fees at the Bukit Merah Lake Town Resort. Moreover, it can be used at certain merchants like A&W, Burger King, Dunkin Donuts, Baskin Robbins, Station 1 Café, 7-Eleven, Caltex Star Mart, Carrefour, Cathay Cineleisure and other selected location. In the future, Touch ‘n’ Go card may be used for Express Rail Link like the KLIA Ekspres and KLIA Transit.

Let’s move on to the Octopus Card that is widely used in Hong Kong. The card is to pay public transportation fees (except Taxis and some public minibuses), as well as retailers who accept Octopus, such as convenience stores or restaurants. It is debuted in 1997, where it instantly became widely used in the public, as it simplified the transporation payment process to take only a couple of seconds. There are now over 10 million Octopus Cards in circulation, which exceeds Hong Kong's population of 7 million. Pioneered in Hong Kong, and now mirrored in London and New York, the Hong Kong Octopus card is a stored value card, which allows a person to access to all of Hong Kong’s public transport. Local ferries, trams, subway, buses and minibuses all accept the cards, you can even, with the MTR regional rail, travel to China with an Octopus.

The card is ubiquitous around Hong Kong, with almost all residents using it and it’s an excellent way to save time. It is usable in MTR, KCR, Light Rail, Trams, Peak Trams, Star Ferry, convenience stores such as 7-Eleven, Circle K, supermarkets, fast food outlets or public telephone booths, even the wet market (Chung On Allmart Wet Market, Ma On Shan), personal care store (Sa Sa Cosmetics, Watsons, Angel Cosmetics) and many other places.

Other country that are using pre-paid cash card is Singapore. The card is called EZ-Link cards and it is be used commonly in Singapore for paying transportation fees in the city-state’s Mass Rapid Transit (MRT), Light Rail Transit (LRT) and public bus services. As of 2007, there are over 10 million EZ-Link cards in circulation, with 4 million card-based transactions occurring daily. The system has since been expanded as being used for payments in Singapore branches of McDonalds. Some schools in Singapore have also started to adopt the EZ-Link card as a way to mark the attendance of students and to pay for food served within the school campus.

The holders of the current EZ-Link card will get new Contactless ePurse Application (CEPAS) compliant cards in a free one-for-one card replacement exercise which will start in January 2009. The new EZ-Link cards also have a higher storage capacity of S$500.00 instead of the previous S$100.00 limit. This means that users can use EZ-Link card to pay for purchases at retailers and eventually for Electronic Road Payment (ERP) and car park charges, on top of paying for train and bus rides.

References:

1. http://en.wikipedia.org/wiki/Touch_
2. http://www.touchngo.com.my/MediaCentre_FF.html
3. http://www.europestring.com/pre-paid-cash-card/
4. http://www.hong-kong-travel.org/Octopus.asp
5. http://www.octopuscards.com/consumer/payment/use/en/index.jsp
6. http://en.wikipedia.org/wiki/EZ-Link

Mobile Payment Systems In Malaysia : Its Potential and Consumer's Adoption

Introduction

Mobile payment systems or called as M-payment has been well adopted in many parts of Europe and Asia. It has emerged as one of the popular and convenient methods of payment. Mobile payment is a point-of-sale payment made through a mobile device, such as a cellular telephone, a smart phone, or a personal digital assistant (PDA). By using mobile payment systems, a person with a wireless device could pay for items in a store or settle a restaurant bill without interacting with any staff member. In addition, a consumer can use a mobile phone to pay for wide range of services and digital goods instead of paying with cash, cheques or credit cards.

Current Mobile Payment System That Are Available In Malaysia

Mobile Money (MM Wallet)

Mobile Money is a PIN-based Mobile Payment Solution designed by Mobile Money International Sdn Bhd to address the limitations and bottlenecks created by cash, cheques and credit cards. It allow customers to pay for goods and services at anytime, anywhere using only a mobile phone coupled with a 6-digit security PIN (Personal Identification Number) via SMS.

In Malaysia, the major obstacles that faced by merchants who are doing online selling transaction is when selecting a payment gateway. The reason is because there are too few choices available, and worse, none of these limited choices are cost effective. However, Mobile Money has been addressed this problem, since it allows merchants to take online order without the need for online shopper to disclose their credit card information.

In order to pay using Mobile Money, a shopper must have either a savings, current or credit card account with participating banks such as Hong Leong Bank and Bumiputra-Commerce Bank. It functions like a Credit Card if a shopper applies for a "Pay by Mobile Phone" credit card account (eg. Hong Leong Mobile Credit Card). The shopper will be billed by the bank accordingly by month's end. In addition, it functions as a Debit Card if it is tied to shopper's savings or current account. The amount will be deducted instantly from the account upon successful transaction.

Maxis FastTap

Maxis FastTap is launched by Maxis Communication Bhd, in collaboration with Nokia, Visa, Maybank and Touch 'n Go. It is an integrated mobile payment service that utilizes Near Field Communication (NFC) technology. By using this, the customers can use their mobile phone such as Nokia 6216 Classic phones to purchase goods and services at more than 1,800 Visa payWave merchant location. In addition, customers also can pay for toll, transit, parking, and theme park.

According to Maxis, FastTap service marked a few "first-in-the-world" milestones for contactless mobile payments using NFC, a shot-range wireless technology that allows communications between devices at close range. Besides that, it is also the first global service that integrates multiple NFC applications for contactless credit card payment and Touch 'n Go electronic payment for transit, toll an parking payment on the same device.

Paymo

Paymo is the trusted mobile payments network that allows consumers anywhere in the world to buy online and pay with their mobile phone. According to research, more than 70 percent of the world’s online population has no credit card, but over 3 billion consumers own a mobile phone. By having this opportunity, Paymo opens the world of online commerce to these people, offering them the ability to buy online and pay using their mobile phone.

By using Paymo, it helps to simplifies and streamlines the e-commerce process for digital items such as virtual goods, video games, and applications for social networks and mobile devices. Furthermore, it eliminates the need for log-ins and passwords, remembering credit card numbers or setting up separate accounts to facilitate online transactions that are linked to a bank account or credit card. Moreover, it provides a trusted global payment system for online purchases that is fast, easy and secure.


The Current Customer Base and The Merchant
Current customers base who will used mobile payment systems in any transaction are those online shoppers who want a simple and secure method of payment that can be used in as many online shops as possible. Besides that, it also included business entity who may purchase goods or services from a merchant and teenagers as they cannot access regular financial services.

As for the merchant, it included those individual, business entity, hardware and/or software that receives a card number to facilitate a transaction, whether or not in exchange for goods or services. Therefore, it may be an online bookstore such as Amazon, an online auction such as eBay, or a local restaurant.


How to Encourage Customers to Adopt Mobile Payment Systems
To encourage more customers to adopt mobile payment systems, we can describe the relative advantages of mobile payment systems :

• Compatibility. Mobile payment systems are compatible with small value payments contemplating cash payments. For example, electronic ticketing such as car parking, public transportation, movies; mobile content such as music, games; small value payments at Point-of-Sales such as a chocolate bar or a newspaper on a kiosk and so on.

• Convenience & ease of use. Mobile payment systems will increase consumer's convenience by reducing the need for coins and cash in small transactions and increasing the availability of purchase possibilities. Besides that, there is no pre-registration and no new mobile software is required

• Time and place independent purchases. By using mobile payment systems, consumers can make their purchase anytime and anywhere without any restriction.

• Queue avoidance and speedy. With mobile payment systems, customer do not need to have to queue up when making their payment of purchase as they can just use their mobile phone. Moreover, by using mobile payment systems, most transactions are completed in less than 10 seconds.

Sources:

1. http://en.wikipedia.org/wiki/Mobile_payment
   
2. http://www.m-indya.com/shownews.php?newsid=38
3. http://blog.2experienceit.com/2009/04/09/maxis-fasttap-multipayment-mobile-service/
4. http://www.crunchbase.com/company/paymo
5. http://project.hkkk.fi/helsinkimobility/presentations/ExploringConsumer.pdf

Electronic Currency

Evolution and reform of currency/money has kept taking place since the birth of money. In the age of rapidly changing science and technology and in the time where computer has taken place, it is natural to imagine, think and search for the possibilities of a kind of currency which is more suitable for this contemporary age. This kind of currency is known as 'electronic currency'. Electroni currency trading is a growing industry as more and more people are purchasing items online in the form of electronic currency.


Electronic currency, which is also known as e-money, electronic cash, electronic money, digital money, digital cash or digital currency refers to money that is exchanged only electronically. In other words, electronic currency is simply a unit of exchange using internet. Computer networks, internet and digital store value system is required to ensure the effectiveness of the exchange .

On the other hand, electronic currency allow a person to send and receive money instantly to family, friends and business associates worldwide. Furthermore, it also can be used to make online payments 24 hours a day from anywhere. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. EFT is a computer-based systems that is used to perform financial transactions electronically whereas direct deposit refers to the deposit of funds directly into a bank account as a form of payment.

Electronic currency were being used by several companies. One of them is Click and Buy.In the year of 1999, Norbert Stangl founded FIRSTGATE Internet AG. The Internet payment system ClickandBuy is a full-service solution for e-payment and billing. It was launched in the year of 2000. Click and Buy offers the possibility to make safe and convenient purchases of Internet content and services.


PayPal is also one of the company that uses electronic currency. PayPal is an e-commerce business that allow payment to be made through internet. In other words, the customers may transfer their money through internet. Some other examples of companies that uses electronic currency include payloadz, peppercoin, paystone technologies, etc.


Benefits of Electronic Currency
There are pros and cons of using electronic currency. One of the benefit is convenience. The electronic currency is an online electronic cash systems that are operated through the Internet. It provides convenience to the user as well as the banker. This online system can be accessed through the Internet from anywhere in the world. Hence, the user does not have to actually go to the bank to transact any business. Meanwhile, the online system also provides convenience to the banker, as he does not have to deal with long queues of people. This will in turn increases the speed of transactions in financial organizations.

Another benefit of using electronic currency is that small-scale and local level merchants can also access and transact in the global market. Electronic currency truly globalizes the economy, since the user can download money into his cyber-wallet in any currency desired. The merchant can accept any currency and convert it to local currency when the cybercash is uploaded to the bank account.

Besides that, electronic currency provides privacy to the user as it is fully anonymous and untraceable digital cash. It gives the user with the confident that their user ID will not be revealed in anyways

Limitations of Electronic Currency
However, there will also be limitation in using electronic currency. One of them would be failure of technology where a breakdown of network may occur. Besides that, the this online electronic cash system may be defected by virus, worms and so on.

Other limitations of electronic cash include serious misuse of a stolen smart card. Criminals who have strong knowledge of the technology of these systems can easily misuse it, if a reliable security system is not deployed.

Last but not least, many pros and cons are bound to appear as the technology of electronic cash develops even further. However, overcoming the cons of the technology will make electronic currency a very convenient system and a widely accepted, revolutionary mode of cash.

References:

1. http://en.wikipedia.org/wiki/Electronic_money
2. http://clickandbuy.com/US/en/
3. http://www.iit.edu/~peacjen/cs485/ecash2.htm
4. http://store.payloadz.com/