With the appearance of Credit Cards, are there needs of borrowing money?

With the appearance of Credit Cards, are there needs of borrowing money?

28 Dec, 2020

Current situation of credit cards and borrowing money

Nowadays, young adults are more willing to spend on different goods and services: shopping, enjoying good food, purchasing non-tangible goods. In view of rapid development of online shopping, you can easily shop online easily by just staying at home. In Hong Kong, most of the credit cards issued by the banks have high approval rate, especially when the applicants are university students. As most of the university students reside with their family members, their family members will still lend them a hand when these students can no longer repay their loans or successfully apply for loans.

Apart from that, university students are expected to have a higher chance in getting good jobs after their graduation, which also explain why many banks are more willing to lend money to university students: after all, using credit cards is a means of borrowing money within a short period of time.

Why would young adults continuously consume?

4 Main Factors

  1. Influence of social Media
  2. Impulse Buying
  3. Relatively low outstanding account on average
  4. Allowance of minimum payment

While young adults are visiting social media, they are easily being encouraged to impulsively buying due to numerous promotion campaigns, meaning that they will be easily encouraged to purchase the stuff they like when knowing the promotions they have, including festive sales, membership discounts and discounts using specific credit cards. Aging 18-35, they have high consumption power and are willing to consume.

Why would young adults continuously consume?

Most of them do not bear the family burden, why explains why they would spend as much as they want when buying. They would either borrow money from friends or work on a part-time basis instead of considering the option of borrowing money from banks or personal loan companies as well even if they had heavy credit card debts. Even if you cannot fully repay the outstanding balance of the credit card, you can also pay the stated minimum payment amount (around$200-300) on credit card statements.

However, the interest of minimum payment is calculated based on compound interest, indicating that the interest will continuously increase. Most of the young adults are not familiar with the calculation of the minimum payment and they are misled that paying minimum payment is the easiest and quickest way of paying off credit card debts. Learn more about Minimum payment of Credit Cards.

Vicious cycle of paying minimum payment

Actually, it is a vicious cycle: when they have successfully solved the problem without borrowing money from banks or personal loan companies, they would choose to spend money with credit cards, splashing a lot without careful consideration.

As mentioned above, such impulsive buying is a vicious cycle: after you have successfully fully repaid the credit cards of the month, you will again fall into the trap of impulse buying when you have discovered goods you want to buy.

The most crucial problem is that most of the people are strongly influenced by the trend of trendy goods. For example, most of them would buy the latest model of smartphones when it is newly released, given that their current in-use models are well-functioning.

Will that be any fluctuations in APR?

Yes. A lot of banks or personal loan companies would launch loan promotions for new customers for attracting customers. For example, the interest is waived or the interest rate is lower for the first few months after drawing down the loan. However, the calculation of APR is changed to the one stated on the loan agreement after promotion ends, which is why you also need to pay attention to the overdue interest based on the stated APR.

Regardless of personal loans, credit card repayments and mortgages, you may need to bear overdue interest rate of at least 29% for overdue repayments.

Will that be any fluctuations in APR?

What are the negative impacts?

You may ask, “What’s wrong with borrowing money or repaying credit card lately? As long as I can fully repay the credit card outstanding balances even if there are late repayments of credit card…” Actually, such records will affected your TransUnion credit report negatively: your TransUnion credit report needs to be reviewed when you are about to purchase cars, property, or even if you are about to have a new job. First impression will be adversely affected if your TransUnion credit report was poor.

If you are going to borrow money from banks or personal loan companies, regardless of personal loans, mortgages and collateral loan, your TransUnion credit report needs to be reviewed as well to determine if your loan application is approved. You can check What is TU for more information.

惡性循環

Reason of impulse buying: Lack of ability of money management

Credit cards do bring convenience to our daily life, especially when you shop online. However, a coin has two sides: as credit cards can easily used to settle payment, many young adults easily spend a lot then they expected. You are advised to carefully manage your money and buy according to your actual spending power instead of splashing a lot on luxurious and unnecessary goods.

沒有理財能力

In the recent days, there was an observed trend of increasing number of young adults asking for support due to heavy debts and bankruptcy petitions, in which around 35% of them aged 19-30, stating the main reasons of filing bankruptcy petitions are overspending and heavy loan debts. If the problem was unsolved, there will be more young adults overspend, and in the severe cases, they will even file a bankruptcy petition in the severe cases.

How can the credit card payments be settled at early stage?

If you have any friends who have encountered such difficulties, you should advise them to solve the problem before the credit card outstanding balance continuously grows. If you are still concerned if you need to pay minimum payment of credit card, you are advised to apply personal loans and fully settle the credit card outstanding balance before TransUnion credit report had become poorer.

如何解決卡數問題

Cashing Pro’s credit card repayment loan service allows 1-minute online application, 10-minute approval and maximum $300,000 loan approval amount. Staying at home and you can draw down the loan easily. With flexible repayment system, the interest you need to pay will be reduced as well. Customers are allowed to fully settle the loan during 60 loan instalments without any penalty interest or handling fee, which can meet those who have short term immediate cash needs.

You can check Cashing Pro’s credit card repayment loan for more information.

One Click to settle your credit card outstanding balance.

Warning: You have to repay your loans. Don’t pay any intermediaries.

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