Black Cards And Banking Case Solution
After having a coffee, Cecilia gave Luke a goodbye kiss on the cheek, she mentioned “It’s time we consider the credit cards. If we are going to build a life together, we might as well start acting that way financially”. After this, Luke started to wonder whether credit cards were a good idea for couples or not. Luke hada very bad experience with the credit card in terms of his behavior. Luke was very concerned about repeating this behavior if he and Cecilia get a credit card together. Through internet research, Luke learned that there were two basic components for the credit card business: Card issuer and Card Company. The credit card issuers are mainly large banks like Citibank, JPMorgan Chase and Co, and Bank of America. The cardholder borrows money from the card issuer. The Visa and Master Card dominates the card companies which contributes 80% of the credit market. The credit card companies act as intermediaries between the merchants accepting cardholders and the institutions, usually banks that issue the card. They should get separate cards. Because the joint card will increase responsibility to both. They both have to use it economically and pay the full balance each month. (Khan, 2019)
Ans no. 1
Pros of having a credit card
- A credit card offers convenience to the cardholder.
- A credit card allows you to leave your cash in the bank rather than in your pocket.
- Cardholders who pay the entire balance on the due date are not supposed to pay interest charges.
Cons of having a credit card
- When cardholders default, their cost is losing 100% of that account.
- The card can become a risk when the cardholder doesn’t pay the whole amount when it’s due. If the full payment is not paid, the accrued interest started to increase until the full payment.
- Once the bill becomes late, the cardholder started to receive the call, messages for payment which could become annoying.
The way in which I might get into trouble while using a credit card is if I miss the payment in any month. Due to some reasons, I could exceed the credit limit which might drag me into trouble.
If I was in place of Luke, I would have applied for a credit card immediately because it helps in emergency especially when the person is in short of cash. But I will make sure not to exceed the credit card limit and pay the balance each month.
The pros and cons of Luke and Cecilia having joint cards instead of the individual card are they both remember the due date for the payment, if one forgets other person will remember it. Additionally, they can share the balance amount. On the other hand, they both have to make sure that the credit limit must not exceed 40% which is a drawback of a joint card.
Ans no. 2
The credit card issuers are mainly large banks like Citibank, JPMorgan Chase and Co, and Bank of America. The cardholder borrows money from the card issuer. The merchants receive their money less the transaction fee shortly after the transaction, but it is up to the bank to send the bill and collect payment at the end of the month.
The Visa and Master Card dominates the card companies which contributes 80% of the credit market. The credit card companies act as intermediaries between the merchants who accept the cards from the cardholders and the institutions, usually banks that issue the cards to the cardholder. Visa and Master Card charge the fees from both sides.
The card issuer makes money by issuing cards to the risker applicants because it helps in generating more annual fees and interest income. The issuer is happy to receive interest payments as long as the cardholder is never late, never misses a payment, and never defaults. On the Contrary, the card companies charge each merchant in exchange for their credit card payments…………………………
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