The era of personal loans has basically been replaced by credit cards, because credit cards can essentially be used as a loan for those who have such, and while the interest rate for that loan is typically rather high, unless one is able to get a promotional discount rate, it still represents a loan and also a credit line for the consumer. So too, banks have a constant need to loan out money or else the banks wouldn’t themselves make any money, of which, credit cards serve that purpose of loaning out money to consumers, of which, thereby the bank has the right to charge interest rates for those loans that are not fully paid off every month, along also with the right to charge penalties for those that are late in making their minimum payment. Additionally, when it comes to credit card limits, the bank is always in the boss seat, because although many people believe that once a credit limit is issued that a bank can’t reduce it or even to eliminate such, the terms and conditions of these credit card loans stipulate that banks can reduce the customer credit limit at their discretion upon written notice, and finally banks can terminate a credit card account immediately for various types of violations that the consumer has violated.
Yet, one of those things which isn’t recognized as much as it should be, is that credit cards can also serve as a consistent short term interest-free loan, of which, this is easy to accomplish for a conscientious consumer to take advantage of, because credit cards have a known billing period of the charges accumulated; so then, for instance, if a credit card bill consists of charges from June 16th through July 15th, with a payment due date of August 10th, a savvy consumer would therefore deliberately make the bulk of their charges on or about July 16th, with the sure recognition that those charges would not be due on August 10th, but rather they would be due only on the next billing cycle, which would be on September 10th, thereby indicating that the consumer would get an interest-free loan from the bank of about 55 days or thereabouts. Again, this only applies to those who pay their credit card bills on time and in full, and who have timed their credit card purchases to take advantage of the “float” between their purchase and the payment of such. This means that the consumer who is able to do this consistently essentially gets interest-free loans of up to 55 days again and again, thereby saving them a considerable amount of money, which would be due if they paid the traditional interest rate on their credit card balance, which often is situated around 20% per annum.
One might think that millions of people take advantage of this knowledge, and this is indeed true, which therefore means that it is those consumers that don’t pay off their credit cards in full, that are supporting not just those that get that free ride by paying their monthly credit cards in full, but also the very banks that issue these credit cards, for the expressed purpose of making a profit.