Credit Research Essay

In the modern world, credit is an essential component of economic activity of companies, individuals, and even entire states and international institutions. At the present days, the life is practically unimaginable without the use of credit and in such a situation, it is extremely important that the credit rating of a company or an individual was good since it will provide this company or individual to profit from the use of the credit.

In fact, as credit has become an essential part of human life, it is possible to trace the dependence of people on good or bad credit rating at any moment that is particularly obvious in relation to credit cards. It should be pointed out that a person with a good credit has quite different options compared to a person who has a bad credit.

Speaking about good credit options, it should be pointed out that there are a variety of them individuals can benefit from. In this respect, it is worthy of mention that nowadays it is possible to receive certain rewards for good credit.

For instance, some credit cards provide users with a good credit with an opportunity of getting airline miles that can be redeemed for airline tickets. The better is the credit and the more advanced the credit card is the higher will be the reward. But it is worthy of mention that this option is not always available depending on their airline company.

At the same time, probably the most widely spread option for individuals with a good credit rating is the opportunity to get some discounts on certain goods and services but similarly to the previous option this one has its own limitations and it is not always the goods or services an individual really needs that are discounted.

In such a situation, for an individual with a good credit, cash back rewards seem to be the best option since an individual can receive the cash and use it as he/she actually wish. Traditionally, a credit card that offers such an option rewards cash as a percentage of purchases made using the credit card. Practically, it means that an individual can receive 1% cash reward for each $1 he/she charges. Optionally, cash can be rewarded in a specific intendments once an individual charge a certain amount of money, for instance, $50 reward for a charge of $5000.

Quite a different situation is for individuals with bad credit. In such a situation also several options are available. To put it more precisely, the user of the credit card can face such limitations as account overdraft which implies that spending is limited to the amount that the user has in his/her checking account. However, often when a user manages his/her credit card responsibly he/she has no serious problems with credit. Also, the exist more serious limitations such as pay-day limit on transactions when the bank establishes limit on the amount of money the credit card user can debit per day or on a number of transactions per day. Also their exist the option of blocking of the credit card that is probably the worst option since it is quite complicated and admits the probability of consumers mistakes. Consequently, the account overdraft seems to be the most plausible option for an individual with a bad credit.

However, the major difference between good and bad credit becomes particularly obvious when the pays off are analyzed. To put it more precisely, in the case of a good credit if an individual chooses a cash back reward option it turns out that he pays off substantially lower sum compared to an individual with bad credit, who chooses the account overdraft option. Along with certain limitations the latter credit card user also have to pay of practically double interests compared to the user with a good credit. Notably, on taking $5,000 for three years the user with a good credit will pay $149,85 per month, i.e. $5,394,6 in total, while the user with a bad credit will pay $166,07 per month, or $5,978,52 in total. Similarly, on taking $10,000 the user with a good credit will pay $299,71 per month, or $10,789,56 in total, while the user with a bad credit will pay $332,14 per month, or $11,957,04 in total; and for $15,000 it will be 449.56 per month, or $16,184,16 in total, and $498,21 per month, or $17,935,56 in total, respectively.

In such a way, it is obvious that good credit provides not only substantially benefits in the credit card use but also decreases substantially the pays off and this is why good credit is really good and important to users.

At the same time, it should be said that credit is very complicated process and the advices of specialists are often essential. In this respect, it is possible to refer to some articles which may be very helpful. For instance, What Your Credit Score is Made Of by Irby LaToya provides readers with information about the credit car scores that may be quite helpful for users since often they simply get in a mess attempting to understand all the nuances of their credit score. Not less important to users will be the article written by the same author, Get Rewarded for Using Your Credit Card which is basically destined to readers which have good credits. The author provides ample information concerning the rewards that may be offered to customers but, this article obviously lacks the concern about other users whose credit is bad and, in general, the article just looks like a kind of promotion of possible credit card rewards.

Thus, taking into account all above mentioned, it is possible to conclude that in the modern world credit is important but good credit is even more important. Obviously, nowadays credit cards are used everywhere and, consequently, users want that their credit was easy to use and cheap and this is exactly what good credit provides users with, while bad credit imposes significant limitations on the credit card use and is substantially more expansive for users.

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