ADVANTAGES AND DISADVANTAGES

OF A CREDIT CARD

By

2020
Dedication

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ACKNOWLEDGEMENTS

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TABLE OF CONTENT

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 CHAPTER ONE

INTRODUCTION

1.1 Background

Credit card is the payment instrument of the modern world and called as the plastic

money. Thus, it enables the cardholder to purchase the required goods and services

without paying at the moment of meeting the need. The card market of our country

has become the third biggest market in the Europe as the credit card count reached up

to 58.79 million in 2016, while it was 15.71 million in 2002. While the UK takes

place at the top of this ranking, Spain ranks number two. When the total transaction

amount with credit cards is examined, Turkey ranks 10th in Europe (Aysan, Duru,

Kara, Muslim and Yıldıran, 2006: 34-49). According to the data announced by the

Bank Card Center (BCC), the credit card payment amount in August of 2016 shows

the highest credit card expenditure that has ever been made up till today, with 47.7

billion.

In recent years, there has been a dramatic growth in credit card usage. This increase in

the number of people holding credit cards and incurring credit card debt has generated

concern that these people are overextended and unaware of the long-term

consequences associated with severe indebtedness.

When other debt is added to this, such as loans, the concern becomes even greater. If

used responsibly, credit cards can provide a number of advantages. Credit cards can

be a convenient means of payment, a useful tool for learning financial responsibility, a

resource in case of emergencies, a means to establishing a good credit history and a

way to gain greater access to credit in the future. If credit cards are mismanaged or

misused, however, the disadvantages can result in severe financial consequences. The

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convenience of credit may tempt people to live beyond their means. Excessive credit

card debt and late payments can damage peoples’ credit ratings and make it more

difficult for them to obtain credit down the road. In addition, who are financially

inexperienced may not understand the cumulative effect that interest rates can have on

the amount of debt owed. Inexperience with credit and a lack of personal financial

knowledge are likely to place some people at greater financial risk for having large,

and perhaps unmanageable, debt burdens when they graduate. (Allen & Joyce, 1997)

The credit card brand (Visa, MasterCard, American Express and Diners Club) and its

marketing activities indeed depict global and multicultural business orientation and is

highly competitive (Worthington, 1998, 2005; Worthington and Edwards, 2000;

Foscht et al., 2010). Moreover, the dilemma of targeting viable target audiences

especially the college-age Generation consumer cohort to credit cards has been a

challenging research agenda for many years (see e.g. Blair, 1997; Chen and Volpe,

1998; Noble et al., 2009). In fact, the difficulties in attracting college students to

banking and financial products has long been confirmed by Lewis (1982a, b) who

found that bank advertising and promotions have little effect on students’ selection

criteria.

The literature reveals that spending and credit card use among college students is on

the rise (Hayhoe et al., 2000; Roberts and Jones, 2001). Credit card firms’ interest in

cultivating a relationship with college students and the importance that banking and

financial institutions place on credit card brands is now well documented (Cargill and

Wendel, 1996). Interestingly, however, despite the nagging need to understand the

motivations behind the choice for credit cards and the determination of the importance

attached to credit cards by college students (Noble et al., 2009; Worthington, 1998,

1999), to date, the literature is silent on the key factors underpinning college students’

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decisions about owning credit cards. More specifically, the factors underpinning

college students’ selection of credit cards are unknown. In addition, the importance

that college students place on credit cards is undocumented in the literature (Noble et

al., 2009). To date, not a single study has systematically explored the exact nature of

the dimensionality underpinning college students’ selection criteria of credit card

brands and the usefulness of credit cards to them. This has contributed toward credit

card marketers less informed in the application of marketing and positioning strategies

than they might otherwise be. These gaps in the literature are important research tasks

that underscore the impetus for this research.

1.2 Problem Statement

With the developing technology, the need for alternative payment tools to meet the
ever-increasing needs of individuals has led to the emergence of credit card payment
systems by improving payment instruments. Payment instruments are classified mainly
under four main groups. These are respectively; credit cards, spending cards, bank
cards, and store cards (Kaya, 2009: 1).

A credit card is a payment instrument which enables customers to buy goods and
services and to use cash credits within the determined credit limits allocated to the
customers. Despite it doesn't have the similar features of the modern credit card, the
first credit card was introduced in the nineteenth century. However, the use of credit
cards remained limited due to the high inflation and the crisis resulting from interest
rates at that time. But; payment instruments have become widespread in all around
the world in the 1990s as a result of the positive developments in the global financial
markets. (Aysan and Müslim, 2006).

Hence, major aims of this study were to discuss benefits and disadvantages of a credit
card in Yemen.

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1.3 Research Questions

In order to achieve its objectives, the research attempted to investigate the benefits and
disadvantages of a credit card in order to answer the following research questions:

i. Dose the banks support affect the use of credit card?

ii. Is there benefits of credit card?

iii. Is there disadvantages of credit card?

1.4 Research Objectives

This study measured the context of benefits and disadvantages of a credit card and
specifically achieving the following objectives:

i. To examine the benefits of credit card.

ii. To examine the disadvantages of credit card.

iii. To examine the effect of banks support on the credit card.

1.5 Significance of the Study

The significance of this research comes from two main perspective; theoretical aspects,
represented by academic field and its literature; and practical aspects represented by
decision makers and other related parties. This research will find out the benefits and
disadvantages of a credit. This research will add to each of the academic field and its
literature review for people and other related parties.

From the theoretical aspects, this study will contribute to the body of the knowledge by
examining the benefits and disadvantages of a credit card. In addition, this study
contributes to the practical aspects through different ways, comes from its goal which
focuses on exploring, understand and evaluating the benefits and disadvantages of a
credit card.

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1.6 Limitations of the Study

This study was limited to examine benefits and disadvantages of a credit card. This
study was focused on who use the credit cards in Sana’a the capital of Yemen.

1.7 Definition of Terms

The following definitions describe the key terms that are adopted for this study:

Credit card: is the payment instrument of the modern world and called as the plastic
money Thus, it enables the cardholder to purchase the required goods and services
without paying at the moment of meeting the need..

benefits: something that produces good or helpful results or effects or that promotes
well-being.

disadvantages: loss or damage especially to reputation, credit, or finances.

1.8 Research Organization

Chapter one sets the direction for the study including problem statement, research
problems, research question, research objectives, research limitation of the study and
research organizing.

Chapter two presented the literature review for benefits and disadvantages of a credit
card.

Chapter three research methodology including research design, population and

sampling, data collection, scale reliabilities and the type of tests and techniques used for
data analysis .

Chapter four, focused on data analysis and the results.

Finally, chapter five which presented discussion, conclusion and recommendation of

this study.