Facts About Credit Cards

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A credit card is a small plastic card containing a means of identification such as a signature or a photograph. It authorises the person named on the card to charge goods or services on account. The card holder is billed for these periodically.

FACT 1: The credit card originated in the United States in the 1920’s when oil companies and hotel chains started issuing them to their customers for purchase from company outlets.

FACT 2: The first universal credit card which could be used at a variety of outlets came from the Diners’ Club, Inc. in 1950.

FACT 3: In 1958, the American Express Co. established the travel and entertainment card. Under this system the card holder paid an annual fee and was billed periodically. Co-operating merchants paid a service charge of 4 -7% of total billings.

FACT 4: The bank credit card system whereby the bank credits the account of the merchant and assembles the charges to be billed to the card holder was introduced in 1958. Under this system, the card holder settles his/her dues with the bank directly. The card holder has a choice of paying in toto or in instalments with interest. The first such plan was set up nationally, in California, by the Bank of America. The plan was later renamed VISA. The interest received by the bank permits the bank to lower the service fee paid by the merchants. In addition the banks no longer need to charge the holder a service fee.

FACT 5: This bank credit card system spread to all parts of the world, permitting card holders to make international purchases. Major global bank credit cards include MasterCard, JCB (Japan), Barclaycard (Europe, UK, and Caribbean)

FACT 6: In the late twentieth century the use of credit cards increased dramatically. Customers started spending more than their incomes, leading to spiralling default. The global financial crisis of 2008-2009, further increased credit card debt.

FACT 7: USA is the world’s most indebted country, followed by UK and Australia. Non industrialised countries with strict bankruptcy laws have relatively low credit card debt.

FACT 8: In order to control the debt situation the United States passed the Credit Card Act in 2009. The Act prohibits unfair practices and mandates greater transparency on rates and fees.

FACT 9: Worldwide there are millions of credit card holders spending millions of credit card dollars. According to a survey conducted in 2012, VISA credit card holders are the biggest spenders. Visa card holders spent 883.5 million dollars in the previous financial year. Next comes MasterCard with 721.4 million dollars. JCB card holders spent 79.1 million dollars and Diners Club card holders spent 5.8 million dollars.

FACT 10: Credit card spending and debt repayment varies by gender, age and financial literacy. Of the card holders in the age group >50, 27% had more than 4 credit cards. In the age group 18-49, only 16% had more than 4 credit cards. However 65% of card holders over the age of 50 had fully paid their credit card balance. In the 18 to 49 age group, only 52% had fully paid their credit card bills. 34% of people in the 18 to 49 group had no credit cards, but only 16% of the >50 group did not have a single credit card. Using a credit card, women tend to indulge in a more luxurious lifestyle than men. This is most acutely seen when the card holders are not financially literate, but marginally higher spending by women is observed even among financially literate card holders.

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