Limitations of Credit Cards - Source of Finance
Limitations of Credit Cards as a Source of Finance are as follow:
i) These cards lead to overspending on the part of the holder and like many disorganize the organization's cash budget and cash planning.
ii) Limited like to the activities they can finance like they are ideal for financing working capital items and not fixed assets whether case they are not a profitable basis of finance.
iii) They are expensive to maintain and acquire since of associated cost such as ledger fees, insurance, registration, commission expenses, renewal fees or etc.
iv) It is a short-term basis and is open just too a few establishments whether case a company can acquire goods and services from those establishments such can accept them.
v) Entail a lot of formalities to obtain as e.g. of no guarantees, presentation of bank statements and even charging assets such are partially pledged to secure expenses such may be incurred using these cards.
vi) They may be misused via dishonest employees who may employ them to defraud the organization off goods and services such may not advantage as for organizations.
vii) Credit card organization may suspend the use of such cards not with any notice and this will inconvenience the holder who may not meet his/her ordinary needs acquired through these cards.