Although the economy has gained a bit of stability in the last few months, the situation is pretty far from encouraging. This has resulted in a number of job cuts. As a result, more and more people are making late credit cards payment. In fact, the situation is poised for a graver turn of events, if the situation does not improve soon.

A major effect of this situation is that, with a rise in late credit card payments, there has also been a reduction in personal savings rate, which has gone down by a huge margin. This has further worsened the situation as a vicious cycle is formed, where one factor leads to another.

This further leads to a sudden change in credit policies, whereby, stiffer conditions are imposed in regard to obtaining loans from the banks. When such a condition occurs, the small and the medium sized entrepreneurs are the worst hit lot. With lending institutions, as well as investors opting for less risky investment options, while the small and medium sized enterprises are clearly left to fend for themselves. Most times, we see a sharp decline in availability of credit, often diminishing the relationship between credit availability and interest rates.

Such a situation has been said to be a direct result of huge bad debts incurred by the credit card companies and lending institutions. In order to keep up with the competition, most lending institutions lower their criteria for credit. This leads to a large number of inappropriate debts, as a result of which, credit crunch occurs. Although this is not the only reason; but definitely it is one of the most common reasons.

Apparently, the credit card user is also not in a very good condition either. Most of the times, he/she is lured into a honey trap, wherein, he is made to believe that he/she is being handed over this wonderful tool; and in lieu of it, he is being charged a very minimal amount, which is actually peanuts in comparison to the advantages, which are being bestowed upon him/her by this magnificent piece of plastic.

The average guy today carries around five to six credit cards in his wallet; literally buying products at will, simply because the credit card firms have made him/her believe so. But the myth gets shattered, when he/she finally catches up with your credit card bill. By the time the user realizes that there are no free lunches in the world, his entire budget is in doldrums.

Many a times, a user is misguided, kept in the dark about hidden charges and at times, blatant lies are thrust upon him/her. As the user scrolls through the bill, he realizes the hard way, THE RIGHT COST OF CREDIT CARD DEBTS. The economy too realizes it.