In recent years, overspending with credit cards has become a growing trend amongst young people. In my point of view, the causes of overspending with credit cards are convenience to purchase, credit cards’ postponable payment and minimum monthly payments. Convenient to purchase is one main cause of overspending with credit cards. Prescott (2006, p1) states that “Giving a teenager a prepaid credit card or access to a parent’s card is fairly common today. It is convenient, but can lead to some startling monthly bills”. Since the young may not have enough self-control as adult, the function of credit cards would easily influence their finance and other problems. Besides, debt can impact some of the young while they are in college, such as affecting concentration on their studies, working a part-time job to fulfill their financial obligations or even leading to drop out of college (Levesque Ware, 2002). Also, online shopping and group purchasing are very common in recent years, these may lead the young to spend well beyond their means. Young people can easy to purchase in everywhere or even on the street, so that the convenience can cause overspending. Besides, Credit cards’ postponable payment is another cause of overspending.
According to Evans (2002) the “buy now, pay later” concept seem like dealing with the devil, because it is a mistake for customers to spend with the credit, also the conditions which provided by the lenders may cause the customers consume on credit illogically. Even the function of “buy now, pay later” can provide the necessary money to satisfy the emergency to buy now, but the customers must be anxious about the paying later, specifically the young. Besides, it should be a lure towards young people that they would tie up their future income, as well as they know that they can pay the bill after a month or even more. The postponable payment can increase young people’s purchase intention to purchase more frequently or to buy luxury item, it is because they don’t need to pay the bill immediately. Therefore, credit cards’ postponable payment can cause overspending. Generally, Minimum monthly payments can also cause overspending.
The young only have little basic credit knowledge, it leads them cannot control their debts, as those who only paid the minimum monthly payments on their credit cards or who were behind on their payments (Jones, 2006). It may lead the young people to purchase luxury or large amount product, since they only need to pay part of amount per month. Moreover, if the card users cannot be paid the monthly payment on time, the credit card companies will add more interests to the payment, ordinarily 2 to 3 percent of the remaining balance (Marie, 2014). Thus, minimum monthly payments may draw the young peoples’ attention when they purchase on impulse, so credit cards can cause overspending easily. In conclusion, credit cards can cause young people overspending due to a number of reasons.
The causes are convenient to purchase, credit cards’ postponable payment and minimum monthly payments. It is a serious problem that overspending with credit cards can lead to financial stress or even bankruptcy. For the recommendations, I believe that the government should limit the young people to apply credit cards with more rules. Also, it needs more disclosure from banks in the application process. Furthermore, the schools should provide more information or knowledge on credit. Hopefully, overspending with credit cards can be prevented as much as possible.