No doubt, with a passage of time, banking sector has introduced many new schemes for the better delivered to their customers. Credit card is also from one of those. Many people take instant benefit from this in short run, but they also suffer through its drawbacks in long run. I believe the disadvantages of this development far outweigh its advantages owing to its maturity payment’s drawback.
Credit card is one of a blessing opportunity for those, who are in the emergency and don’t have enough resources to get out of it, because banking sector has made too easy process for their consumer to used this option. Moreover, credit card also offered wide range ease to the businesses. According to the MM theory, debt is the cheaper source of finance, as companies pay tax after deduction of interest expense from their profit, so it ultimately reduced their taxable income, which lead businesses to the less tax expense, that’s why businesses considered credit card as a alluring source.
On the other hand, if we shed light on long term effects of this opportunity, it can be clearly seen that it becomes arduous for the people in the repayment. As return calculations behind this developed on the basis of “time value of a money”, so in repayment it not only includes principle amount, but also there is high interest rate. Additionally, as per religious context, it is also prohibited in the Islam due to unearned revenue factor.
To conclude, it has many merits, but its demerits outweigh these in the long run. Because of its burden in repayment and distinct views of Islam on its extra charge, which can also put deleterious effects on the mental health of the people.