[Hessah]

In the ideal perfect world, yes. They should be checking every bit they could to ensure that only people that deserves gets it. But, reality is people will lie and dodge criterias to receive more than what they need. And often there's a limit to how far an organisation could go into checking you.

For example, people get study allowance for students that doesn't have an income. But I go and tutor my cousins and all my relative's kids, and i get cash. I probably don't "need" the government hand outs, but I still get it coz I fit their criteria and they can't check on me coz i get cash... kinda thing..



OK, that man with the pants. He earns $300. The bank can very well give him a credit card with $200 limit on it. He gets his pay check, spent $150 on food, and pays for the pants with his $200 limit. In the next month, he gets another $300, pays $150 for food, and he still owes the bank $200. He pays $150 off (because that's all he could afford) and in roll the interest for the $50 he still owes.

That is, provided that he doesn't spend any MORE luxuries. If he does, he rolls more interest through.

There's his debt and interest. Of coz, if he's really a plan ahead guy, he can pay it off in 3 months. BUT if things gets into a bigger scale like a mortgage or a car loan, the lump sum can get bigger and bigger easily.




And just for a fun fact, when I first applied for a credit card, the monthly limit they gave me was 4 times the amount I earn. I didn't even ask for that limit, they just said "here you go". They really don't think about how I was going to repay it coz that's how banks earn money. From interest.