European commission’s restriction on card fees will make consumers pay more

Credit cards – A Boon or a Bane

08:27 10 July 2013

Recently, there has been a proposal for a European Commission rule that will regulate credit card and debit card fees which puts a cap on the interchange fees that go to the bank when they process Credit card payments.

Shops pay the interchange fees to credit card companies and banks, which issue the processing fees every time a credit card is used to pay for a purchase. The fees serve as the issuers’ compensation for providing the shops payment guarantees for the purchase.

Credit cards are now widely used as a purchase instrument. There are definite benefits to using a credit card. For one, it makes buying things so much easier. You do not have to carry around a lot of cash if you are making a big purchase. Most cards offer purchase protection insurance for big purchases in the event the item is damaged or stolen.

Credit cards can help you build a credit reputation, but only if you have good paying habits. Credit cards are convenient to have during real emergencies (such as car breakdowns and medical needs where applicable). Credit card companies also vie to give unique value-added benefits such as discounts from partner establishments, travel discounts and airline miles.

However, credit cards are not all benefits. Using it comes with a certain responsibility.  It is all too easy to fall into the trap of maxing out your credit limit and worry about the payment a month later. Sadly, credit card issuers do not include a user’s manual with the welcome kit.

You have to develop self-discipline and good credit card habits. Endeavor to always stay below your credit limit and fully settle the balance monthly.

Using your credit card indiscriminately can easily lead you to debt. You should know how to say no to yourself when tempted to purchase something which you cannot fully pay come the due date.