The man who sold the world on credit cards
csmonitor.com
csmonitor.com
On the other hand, the economics effects of credit cards, or credit/loans in general can't be understated. Some industries and therefor technological advances like cars or housing for example, would never be where they are without credits/loans.
In the same way i think that a lof of things like computers, tvs, holidays would never get bought without the existence of credit cards. And in the end all of that feeds the gigantic banking industry and can also be seen as the base of everything thats wrong with our financial system, as shown in the 2009 crash.
Debit cards (called "check cards" here) are becoming more popular lately. Thanks to the aggressive adoption of credit cards, the infrastructure to handle debit cards was already there by the time the government decided to extend the tax credit to debit cards as well. Nowadays it's a toss-up between credit cards and debit cards.
But what we call credit cards here is a bit different from the American counterparts. Most Korean credit cards require you to pay the whole balance every month, unless you specifically request a different payment plan at the time of purchase. The amount you have to pay for each of the next few months, including interest, is also fixed at the time of purchase. You can't just pay an arbitrary fraction of your balance or transfer your balance to another card. So it's halfway between a traditional charge card and an American-style revolving credit card. Some banks do have revolving credit cards available, but AFAIK they are not very popular.
Although they are still called credit cards ("kartisei ashrai" == "כרטיסי אשראי") in Israel, and there are some other minor wrinkles, like the way you pay interest rather than penalties when you overdraw your bank account ("overdraft" == "אוברדראפט"), though it is still more expensive than a loan, so something like 3/4 of the population is always overdrawn by some amount.
But until I lived in Canada, I had never really understood the difference between debit and credit cards, I didn't know you had to manually pay your credit card's balance from your bank account once a month or so.
My "credit" card just pulls money from my account at each purchase (well, a few days later). When I was in Germany and the Netherlands last year, every shop was asking whether my card was credit or debit, and I wasn't even sure what to say.
The thing is, both Visa and MasterCard have credit and debit versions of their cards. And thanks to recent European laws, the card has to explicitly state which kind it is, since the transaction fees are different for the merchant (and are capped to 0.3 and 0.2% respectively). Now in France, you won't get a Maestro or Vpay card even if you want a true debit card. It'll be a MasterCard or Visa. Payments are either debited right away or at the end of month. And banks have started to emit "debit" cards for the former, and "credit" versions for the latter, but it's completely irrelevant for domestic payments.
Dunno how accurate it is, but i suspect your card has either a VISA or Mastercard logo on it. That means that when you are abroad the payment is done via either of those, but while in France it is handled via the national system.
Even if I need to send some money to a friend to pay for my share of the pizza, we use an app that lets us send money between credit cards.
I haven't carried coins on me for more than a year. I do have one backup bill hidden away in my wallet just in case things go sour.
Many people carry a credit card too, perhaps as a free service from their bank, or a company card - but so long as one has both it's normally best to use the debit one. If you always pay the bill in time there's very little difference, but I feel a big mental threshold to "buy now pay later".
Why does everything need to be made illegal? If you aren't satisfied with the service a shop provides, don't shop there.
Cash is legal tender for all debts. If you owe someone money without a prior agreement on form of payment, they must accept cash payments. They're under no obligation to make a transaction in the first place if you don't agree on payment method.
Most bank cards issued in Norway that i have seen are debit first via the national system, with the option of using either a VISA or Mastercard as a second option.
And while i have only had to deal with VISA, those billed directly to the account (and seems to be a popular way for paying online).
Pure debit cards also exist, but are not that common, at least what I know.
They allow a factory for example to keep buying inputs while their outputs are being shipped to customers etc.
Credit cards, and their effect on the overall economy is a different beast however. Especially as they have to a large extent replaced the push for higher wages.
A fascinating claim. I can see how that would work, but haven't heard of it before. Is this commonly accepted knowledge in the US, or do you have a source?
If it were impossible to convince people to take out massive loans to buy cars and houses, the automotive and housing industry would probably have taken a different approach in order to sell their goods.
Rentals might have become more popular, curbing the growth of the suburbs, affording workers higher mobility, and resulting in a smaller carbon footprint for the country as a whole.
Ditto for other expensive items such as computers and smartphones. Most of us don't really own our devices anyway; we exercise limited control over the device at the mercy of the manufacturer and/or carrier. It doesn't take much imagination to go one step further and say that you're just renting it for the duration of your contract. I don't really like this scenario, but it's a possibility.
Humans have managed to build and live in accommodation for thousands of years without taking out fixed rate mortgages.
>In the same way i think that a lof of things like computers, tvs, holidays would never get bought without the existence of credit cards.
Consumer goods were purchased without problems before credit cards existed. Habitually buying consumer goods on credit has largely paralleled the great 1970s decoupling from wealth and productivity.
Would you mind explaining why that would be the case?
Never mind that paying through installments or similar existed long before credit cards came about.
I guess the one thing that credit cards did was that they moved the arrangement from being between seller and buyer to be between buyer and card company. so rather than having to get a installment plan set up for every purchase, one instead get them all bundled onto the card account.
I guess that one thing that might get confused is the cultural shift of enabling debt accumulation without direct relation of shame with the seller to the actual buying possibilites.
credit card != line of credit
Credit card is just lubricant to the economy (or debt making some might say).
I didn't ask how can a line of credit exist without a credit card, I asked how can a credit card exist without a line of credit.
> Credit card is just lubricant to the economy (or debt making some might say).
I still don't think that answers the question.
What makes you think it can't ? Of course a credit card relies on the concept of line of credit.
I am stating the obvious that two things (line of credit and credit card) are different and you are the one asking how one (credit card) can exist without the other one (line of credit) like it implied both are the same or mutually dependent. It's not. There are a lot of countries where you can have a line of credit without a credit card. Hence: line of credit != credit card.
> > Credit card is just lubricant to the economy (or debt making some might say).
> I still don't think that answers the question.
That's because you pick the wrong sentence in my reply and make it an answer to your question in order to fit your argument.
Or maybe you really are arguing that a credit card is actually the same thing as a line of credit ?
I'm arguing you can't have a credit card without a line of credit.
You're saying that you can have a line of credit without a card. That's the other way around to how I say it, see? I'm not disagreeing with that one.
1. At least in the US, you receive cash back for using a credit card. As an example, many cards offer 1-2% straight up cash back. Even if you used it in the most inefficient manner, such as just getting the cash back instead of discounted airfare or something, that's a lifetime of saving 1-2% on all your purchases. That's huge.
2. Protection. It's simple. If I use a card and get scammed (mostly happening in Europe I might add), then if I used a debit card it is my money that has been stolen and now I have to get it back. If I use the credit card? It's the banks money.
Now I know obviously that there are people who don't pay their bills, lose their job, or whatever and that's how the companies make money, and maybe if we all used cash things would be cheaper or something, but unless there is a serious movement in that direction you should always use a credit card, even the most basic one you can.
I'll also mention that this doesn't cover the plethora of various benefits that you can use for different cards: automatic extension of warranties on purchases made with credit cards, automatic rental car insurance, etc....
It used to be different though, for example 10+ years ago I couldn't pay on the internet with my debit card, it had to be credit card - we called them "convex cards" because of the "raised" numbers on the card instead of just flat-printed card number.
It's functionally the same, yes, in the sense they are just plastic cards that perform transactions, but as I mentioned in my post there's a big difference in the financial impact. I won't pretend to know the rules, regulations, etc in Europe for credit cards, but when I traveled there I used my cards for everything and only had a problem once with CaptaineTrain booking a train ticket.
With one of my cards I get 3% cash back on dining. So while I'm traveling throughout Europe I'm getting 3% off every meal. If you're paying in cash you're still paying full price. Soooo why pay in cash and not get a 3% discount.
I've also noticed recently that Yelp is offering discounts when people link their credit card in their Yelp account. I saw something like 7% off of your meal for doing so at one restaurant. Now I haven't done that yet, I'm still considering the privacy implications, but it is there.
In the US at least, and I suspect Europe, you should use a credit card for every single purchase.
A lot of shops here offer discounts when paying with cash. It violates rules of card processing companies - or rather, they would violate them to charge more for card transaction, so the stores would just say "3% discount on all purchases, unless paid by card".
Not even close. Being able to spend money that's not yet hit your account is a tremendous advantage for credit cards.
Oh, and when the hotel front desk screws up their holds you aren't forced to shuffle around money while waiting for the money to be released back to your account.
Your first point exist in various forms, but is quite often seen as questionable if not downright tacky or dirty.
As for your second point, the banks offer the same protection. If i spot weird transactions from my account i inform the bank and they will issue me a new card and revert those transactions.
And for your second point, banks also are a large portion of those issuing credit cards. While banks do offer some form of fraud protection, it takes time, you could wind up losing your money, and while your waiting for your money to be recovered you could wind up having overdue bills. I can't pay my mortgage with a credit card, for example. With a credit card, if something happens it simply doesn't matter to me. More often than not the banks catch the fraudulent transaction when it happens and notifies you, then they just overnight you a new credit card while they just investigate the transaction as their own problem and not yours. The first and only time I've been a victim of credit card fraud, somebody attempted to purchase ~$2,000 in jewelry. My bank called me, told me they thought it was fraud and that they had declined the transaction. I told them it was fraud and they sent me a replacement card overnight. If that was my debit card? I'm out $2,000 and have to hope that the bank sorts it out in my favor.
Even if the benefits didn't exist for travel, cash back, etc..., the security of not having to worry about having cash stolen is very compelling.
And the bank vs credit company issue sounds more and more like an artifact of the US banking system.
Although card companies make it hard for shops to offer cash or debit discounts, they exist. Aldi only takes debit cards and is way cheaper than any other grocery. A Thai restaurant I used to go to always brought us the bill offering 5% off if paid in cash(lots of neighborhood places like this). Any bar will throw on tax if you start a tab, but paying the cash price per drink is usually the exact advertised price.
Paypal debit card offers 1% cash back. Schwab debit card offers rental car insurance and free foreign transaction.
Number 1 is specially pervasive in developing countries.
That's how the issuing banks make money, not Credit Card companies. AmEx is the notable exception since they issue cards through their banking subsidiaries but even in their case it's the banking side of the system that generates the profits from the interest payments.
cash discounts are very rare, you pay the same price regardless of whether you use cash or a credit card pretty much everywhere.
also large merchants like walmart, target etc, even though they pay tx fees when the customer pays with a CC they actually WANT the customers to use CCs because according to just about every study out there people buy more stuff when using CCs, so they don't mark their prices up to account for CC tx fees.
So the tradeoff is paying more all the time for gimmicky benefits and having to carry a ridiculous number of plastic cards in your wallet (I actually thought this was a sarcastic caricature of the american consumer. Imagine my surprise.)
It's a pretty simple equation really. There are issuing banks, acquiring banks, credit card network and payment processors making money off of the merchant-initiated transactions and then the issuing bank also charges the customer interest if they don't pay their bill in full and some issuers charge for cards that carry some special benefits.
On the other side of the equation you have merchants paying for the services CC payment industry provides. Most merchants want the customers to use CCs because those customers tend to spend more, they also realize that by accepting CCs they increase their customer base. Talking retail here, online (where things are actually CHEAPER most of the time) CC is king. Prices-wise it's extremely rare merchants to raise the prices when they start accepting CCs or to charge more for non-cash purchases.
So now the last piece here is the actual paying customer and their funds. Nobody is forcing the customer to use any specific method of payment. (The only place I'm aware of where cash is not accepted is some airlines won't take cash for on-board purchases.) Using CCs does have it's advantages for the consumer - not having to carry cash or worry whether you have enough cash on you is probably the biggest convenience. Checkout process is typically faster. With Apple pay/Android pay you don't even need to have a physical CC on you. And then there are things like cash back or hotel/airline points etc. There's also chargebacks as an extra layer of consumer protection but that's a bit of a can of worms.
(They also limited CC fees to 0.3%, so I'm afraid no "cash-back" when I dine)
Has anyone done studies on the effects of cashback on consumer behavior?
This doesn't really happen in the EU due to a relative recent ruling standardizing fees, but that's also what makes America's super cards not be issued by their banks.
Credit cards, and payments in general, might seem really easy to model on the outside, but the whole space is a gigantic rabbit hole. That is why companies that abstract much of it away are valuable for even large merchants.
How about, let's patronize the businesses that offer the best products and services at the lowest cost, and save our "donations" for legitimate charities.
The merchant is charged additional (sometimes substantial) additional fees, on top of the normal processing fees, for transactions done with those cards.
That is true with any big bonus card - whether it is cash back or miles back or triple-points or gas-bonus or whatever ...
In some countries (including the US), a credit card is a card that you pay at the end of the month. You have a statement and you have to pay for that statement. If you so choose you can pay less and pay at least the "minimum payment", in that case you pay interest rate on the remaining money.
There are debit cards, with debit cards the amount is directly debited from your account as you use it.
Then in a lot of European countries, we have cards that we call credit cards which are actually deferred debit cards. The money you've spent is debited from your account on a fixed date at the end of the month. You have a credit line in that until it's debited at the end of the month, you're effectively borrowing money but since it debits your account, you're expected to pay it in full.
Often this is associated with overdraft facilities on the bank account which means that at the end of the month, if the money to pay the credit card bill is not your account, the account will be overdrawn and you will pay interest (which are similar to the interest rates for credit cards in the US, around 18%)...
So, the European system with deferred debit cards is different but in practice has a bit of the same issues with overpaying and high interest rates. It's just that the credit line is tied to the bank account and not the credit card.
Interesting, I'm in the UK and have never heard of this kind of card.
https://en.wikipedia.org/wiki/Charge_card
It seems as though credit cards (via the Barclaycard) became established in the UK before charge cards got a foothold:
http://www.theukcardsassociation.org.uk/history_of_cards/ind...
[0] https://en.wikipedia.org/wiki/Dee_Hock
[1] http://about.bankofamerica.com/en-us/our-story/birth-of-mode...
When did magnetic stripes and swiping become mainstream?
How about calling cards. I believe I sat across from the man who "invented " the calling card as we knew it.
1 - Apple Pay (if available)
2 - Debit Card
3 - Credit Card
And cash for small amount if it makes tipping easier, or they don't take anything else. I only use Credit Cards for car hire, where it seems to be obligatory. Online I always use debit card.
Offline:
1. Through NFC by debit card
2. Through pin by debit card if above 25 euro.
I played with NFC on phone via banking app but didn't want to pay 3 euro a month for that feature.
Cash I don't have on me. Credit card only abroad.
Online:
1. iDeal payment system, I get a message to my phone, type it in and pay.
2. PayPal, coupled to my bank account.
3. Credit card.
Abroad:
1. ATMs and cash.
2. Credit card because debit often doesn't work.
Dutch people who don't travel normally don't have credit cards. If you don't have iDeal on your webshop you miss a big part of the Dutch market.
FWIW, the other day I just made a quick payment with my bank mobile app. I entered an amount of money, it displayed a qr code, the other party (with a different bank) scanned it and the money was transferred instantly. It's a totally free service, no monthly charge, no piling interests, doesn't require me to go into a bank or fill an online demand to get a credit card. Way easier to split the restaurant fees or something that way. Europe, yeah for bancontact.
And:
> and no interest if you have the discipline to not carry a balance.
But there is no interest on debit card and you don't need the credit card discipline so it's not really an advantage over debit card. Some people just don't need or want a credit card. I am obliged to take one because some online services (mooc) requires it (and it's a bother, I should have done that a month ago but it's a hassle to do).
It's probably not a logical thing, but more like people who went through food rationing - who would never leave even a pea on their plate afterwards. On a more macro-level, you can probably see a reluctance to splash cash around for around a decade after each financial collapse.
Do you find being in a restaurant and having eaten but not yet settled the bill stressful? Or having been in a hotel room for a few days and not checked out yet? I'm not sure I'd consider a monthly credit card debt to be morally different to either of those debts. You just haven't settled the bill until the end of the stay, the meal, or the month.
How do credit cars offer better degrees of fraud protections?