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Advantages and disadvantages of using credit cards

In this modern era with the rising of e-commerce on earth, the consumption of charge card is getting popular among the world nowadays. The utilization of credit card has actually spread into the university student and has increasing visibility (Hayhoe, 2002). Meanwhile, this is the best chance for the credit card companies to put up target at college or university students because college students are expected to have higher of earning power and this makes the credit card issuers believe that as a desirable market (Warwick & Mansfield, 2000). Bank card can be best defined as a small plastic card issued by the lender to the consumers to get goods and services in advance with a borrowing limit on the spending (eHow, n. d). With a debit card, the users can to buy goods without using cash. Users can realize your desire to utilize it as online payment in internet and uses it as monthly installment for large volume goods and services (eHow, n. d). However, interest charges are applied to the credit cards.

There are many types of credit card associations nowadays. For example, American Express, Dinner Club, MasterCard, Visa and so many more. Every month, the visa or mastercard user is sent a statement by bank that indicated their purchases for previous month. After the cardholder received the statement, she or he must pay the quantity of their purchases otherwise may choose to pay a higher amount when the credit issuer charges interest on the amount owed. Even bank cards have higher interest levels than most consumer loans; many people still would prefer to utilize it yet. This is because almost every store that we can see allows for payment of goods and services through bank cards today.

The increasing volume of banks that provides bank card has eventually escalates the competition between banks in attracting the customers. Every bank has tried their own way to persuade the clients to use the credit customers. The worst part is, they even attract university students insurance firms promotion in the faculty. Historically, the bank actually began to bump into student credit card market in the late of 1980-an (Manning, 2000). Over time, this will cause many problems to the college students. This is because most of the school students will not how to plan their money effectively. According to Henry, Weber, and Yarbrough (2001), the majority of the students will possess the credit problems is basically because university students do not practice to truly have a written budget. The researchers also expected university students are "susceptible to financial meltdown" (Henry, Weber & Yarbrough, 2001). The incredible increase of the usage of visa or mastercard actually has demonstrated the crisis one of the college or university students. The increased range of credit cards among college has seen a major growth since the past decade (So, Grable & Bagwell, 2003). Predicated on a research, 70% of most undergraduates at four-year colleges have at least one credit card today (So, Grable& Bagwell, 2003).

Advantages and Disadvantages of by using a Credit Card

Credit Card can be an Automatic advanced card which people can use it to get the goods without paying the money. Bank cards are widely use by people all around the world as a way to obtain convenient to get what their needs. But, there a wide range of benefits and drawbacks of utilizing it.

One of the features of credit card is the fact with visa or mastercard can get rid of the need to transport large sums of cash wherever we go. For example, if we are away from home for vocation, we don't need to take massive amount profit pocket. Besides, credit cards could also offer us additional protection if goods that we bought is lost, damaged, or stolen. That's where the credit card company can know that the fact that people have made a purchase. In addition, we can also note that some credit card issuers offer insurance for the clients on large purchases. By this way, the firms can protect their customers and give their customers the security of using the card. With a credit card can also assist us build a credit line. With a good credit history is very vital, which meant that making payments promptly and completely month, it help us not only applying a credit card, but also when trying to get the loans, rental, or even some jobs will more easily.

In conjunction compared to that, credit cards may also be useful in times of emergency as well. For example, students with a debit card can take the required actions by helping parents when they falls ill, an automobile is damaged, or aiming to buy a higher cost books in the university. Some credit cards also offer a little extra benefits for their customers, such as discounts from particular stores or companies, bonuses such free airline miles or travel discounts. All of these benefits is effective for us so long as we bear in mind that out spending limits.

On the other hand, the disadvantage of credit cards is that they encourage visitors to spend money that they don't have. The clients can spend any time as they need even they have less money. Indirectly, the customers cannot pay for the bill statements that what that they had spent. By this way, the more money the clients owe the credit card companies, and yet they'll charge the clients on interest every month on their spending. The other disadvantages of bank card would be that the credit card companies will charge the clients on high amount of interest on each balance that the clients don't pay back by the end of the month. This is one way the credit card issuers make their money and this is just how many of charge card users are certain to get into big troubles. And, credit card fraud also is one of the disadvantages. That's where the bank card also same as a cash, it also can be stolen sometimes. They maybe be physically stolen from customers' wallet or credit card number and use as to swap the money. The good news is that, whenever we realize our bank card is stolen, quickly we can report to the credit card companies. This is to avoid us by not being charged for just about any purchases that someone else has made.

As conclusion, bank cards can make life easier and convenient to the users as they utilize it wisely. But, if we use it wrongly, it'll become huge financial burden for us. If we decide to use the credit cards, we should know some simple rules such as limit our purchases, don't spend outside our budget, pay off the balance by the end of each month, and most importantly is don't give bank card information to other people as the safety methods.

1. 1. 2 Development of credit-based card in Malaysia

In old days, there was no such thing as money. Each individual would provide for his own food and clothing and also shelter. As time goes on, a system of barter by exchange of needs began. Barter trade however, had not been that easy. Sometimes, it was difficult to acquire those who had exactly the item that was needed. Some goods were used for barter trade because they could easily be carried, have a value and become easily divided. This commodity money became a medium of exchange soon. Common goods such salt, bread, grain, tobacco were among the item that had served as money.

The first money appeared when the ruler or king issued a frequent value. For instance, in historical times in Malaysia, blocks and tin were kind of commodity money.

As businesses developed, it became inconvenient to move large sums of coins around the country. In the middle ages, people preferred to deposit their coins with trusted goldsmiths, in trade for paper receipts. Whenever a depositor wished to make payments, he would exchange these receipt back for coins. So long as the goldsmith was trustworthy, the paper receipt was as good as coins. Thus, the first paper money and first banks were developed.

In Malaysia, only the lender Negara Malaysia is permitted to issue coins and paper currency notes. The value of ringgit is legal tender which is backed by gold and forex held by Bank Negara.

In nowadays, nowadays there are 3 kinds of money we can easily see in Malaysia. They are simply coins, paper currency, and transaction account that are cheques and credit cards. While coins and paper currency are used to transfer money at the present time, cheques and bank cards commit money which will be earned in the future. Cheques is the most typical instruments used to transfer funds. And then, cheques and credit cards become more popular as they offer their holders with the energy to purchase without having carried around massive amount cash.

Research Background

Credit card among university students has become a hot topic of growing nowadays. It is because college students are experiencing unique transition period in their lives. Financially, they are going through the procedure from financial dependence to independence. They could have learned some consumer skills in cash management at home before coming to college. At this moment, students only want to learn to learn on how to use credit wisely and simply matured enough to have the ability to sign legal contracts include credit-based card contracts.

There are also various other studies that show that students are greatly associated with bank cards. Yet, the use of bank cards among students has received much attention in recent year from members of the financial community and policy makers. Credit card issuers grab this golden chance to focus on students because they are expected to have higher average earning power and have emerged by the credit card issuers as a desirable market (Warwick & Manfield, 2000). Besides, we can easily see that mixed practices among students' credit use can make them have a low knowledge about credit because they do not grasp the financial implications of experiencing a large amount of personal credit card debt. By this way, this will make them to invest more. (McNeal and Yeh, 1993) A research also showed that at average age of eight years children, making their first independent purchase as socialization as a consumer commences in their early years.

Nowadays, as we know that a service tax of RM50 will be charges on each principal credit-based card in Malaysia start from 20l0. And, for every supplementary card, something with RM25 will be charged yearly. The governments impose this tax is because the users of credit card is increasing daily.

1. 3 Problem Statement

This study analyzes the factors that influence the usage of credit card among IPTA and IPTS students. The research will give the opportunity to accumulate accurate data from the designed questionnaire in order to analyze the relationship of the variables. The following problem statement is supporting the research background of the study:

"From what extent do demographic, knowledge, kind of purchases, credit attitude, and family background influence the usage of visa or mastercard among IPTA and IPTS students? "

1. 4 Research Objectives

Students' attitudes towards charge card could play a essential role in determining its distribution. After figuring out the problem statement of this research, release to the objectives of the research. The objective of this research is to distribute a proper framework and analyze the factors that influence the use of mastercard among IPTA and IPTS students.

From the research study also, it could assist to provide some suggestion to solve this problem. The three main objectives of the research study are:

To investigate the role understanding of visa or mastercard use plays in compulsive buying among the list of students.

To test demographic.

To compare the monthly utilization of credit-based card among IPTA and IPTS students.

To determine which factors is most significant effect towards utilization of visa or mastercard among IPTA and IPTS students.

1. 5 Significant of study

It is important to review that how the mastercard as an integral of contribution to everyone no matter to bankers, users, society or among college students.

Every companies and banks will benefit with owning a bank card. Mostly are those banks earning money from the credit card companies? This is one way it goes. If a bank agrees to adopt their customers' deposit, they don't really keep it all in the back. This is because there are only a tiny percentage of the lender customers will demand their money at any moment, a percentage of most deposits( vault cash), is continued hand. Some of this cash will loan out to credit card issuers in order to finance the purchases their customers make, before customer pays the credit card issuer back. Actually, most credit card issuers are organized as banks, so that they are regulated in a different way than regular companies. As a result, the additional money that is owed by bank or company, the greater that bank or company is worth. This is due to way the American accounting system works.

Meanwhile, the key benefit to each customer is convenience. A credit card allows small short-term loans to be quickly made to customer who need not calculate an equilibrium remaining before each transaction, provided the full total charges do not exceed the maximum line of credit for the card. Visa or mastercard also provides more fraud protection than the debit card for the users. Many credit cards offer rewards and benefits packages, such as offering improved product warranties free, points which may be redeemed for cash, products, and also for the airline tickets. This makes the users feel more satisfaction about their services of owning a credit-based card. Additionally, carrying a debit card is more comfortable to some users either than carrying a bucket of cash in their pocket.

On the other hand, owning a credit card also benefited to community. This is how they permit people around to make a huge purchase, such as expensive materials or those for cars. This make the people can purchase those ideas easier. Yet, with mastercard be useful for emergencies use like medical bills. Also, mastercard offer additional protection of purchases. Example, if the goods that already bought by people is lost or have been stolen, the credit card company can prove for the actual fact that people have made a purchase with unique receipts. So that individuals do not need to worry too much because some credit card issuers are offering insurance on mastercard. With a credit card too, it can benefit to make entrepreneurs. Many entrepreneurs who were unable to get the lender loan will have to use visa or mastercard as a way to finance their projects. Although by this way it is extremely risky, there is no choice to help some entrepreneurs become more wealthy and successful in future.

Nowadays, we may see many credit companies also create target in campus areas to encourage college students for subscribe their card. They might give free surprise such as t-shits, umbrella, water bottles for individuals who signing up the card. Some research implies that students are valuable customers because they're loyal for their first card and will continue steadily to make their purchases in future. Together with the visa or mastercard, students can make large purchases easily such as expensive text books, airfare ticket, hotel room booking, garments, and etc.

1. 6 Organization of study

This research focus mainly how bank card use by students of IPTA and also IPTS.

This research project compromises of 3 main chapters. It consists of introduction and background, literature review, and also research methodology.

The first chapter introduces the area of the study that mainly on the overview and background of the research and the concept of mastercard, its benefits and drawbacks, and overview of the previous and current issues related to this issue, and followed by problem statement of this study. Problem statement is described a specific statement of the question or conditions that to be investigated with the goal of finding and answer solutions.

The second chapter is offers a review on the related literature on mastercard and the factors that can affect its usage. Literature review is overview of facts from past researchers who conducted theirs studies on a single field (using visa or mastercard) in order to support this study. The effort to form literature review was done by the information gathering from the web, journals article and other sources such as past researches journals and articles that is essential to create the literature review. The reason is to find out all the reality, data and information required to support the topic selected. Besides that, this chapter also includes the review of literature that explains the partnership between each independent variables and dependent variable.

The third chapter presents the organized research methodology by explaining the study techniques used in the collection and analysis of the survey data. It offers designation framework, portion of study, population sample size, data collection methods are also included, and identifying the variables that contain dependent variables and independent variables.

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