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Credit Card Issues, Part ICredit cards are gaining such popularity worldwide that some would argue the influx of credit cards has caused a credit economy. In Europe, credit cards are so popular many people no longer write checks. A 2007 study showed there were so many forms of payments in electronic format that the average German only writes 10 checks a year, compared with 83 for the French. Americans, despite their fascination with credit cards, still write 234 checks each year—although this number is rapidly declining with the ease and security of online banking. There is no surprise that credit cards have become so popular. Data transactions are convenient, secure and fast! A typical transaction takes less than one second to approve and the data travels more than 4,464,456 km/hr which is 3,647 times the speed of sound. Fast data communications allow transactions that occur in a few seconds even between countries on the other side of the world. Remember when the express lanes in the grocery store were cash only? It was bad enough when someone had more than their 10 items, but when they also wanted to write a check or pay by credit card the entire line would scorn them! The clerk would have to pull out the bulky machine with the triplicate forms to make an impression of the card, then call the credit company to speak with someone for an approval code. Now credit cards are the preferred method for a speedy transaction. You can start your payment before the checker has even completed scanning your order, and some grocery stores have automatic checkouts where you scan your own items and pay with a credit card making the clerk obsolete. There are three main types of credit cards: charge cards, secured cards and unsecured cards. Charge cards issue you short-term extensions of credit, usually for 30 or 60 days. The most familiar charge card is the American Express card. With charge cards, when you pay the bill on the due date, there is no interest charged. The company makes it's money off of the transaction fees it charges the retailer to use the card and any annual fee the cardholder pays for the credit line. Secured credit cards are ones where you make a deposit into a savings account with the credit card company, then you get a charge card with a limit equal to the amount of your deposit. This is a popular choice for individuals with bad credit. As your credit improves, the line can be increased without increasing the deposit, and eventually, the deposit may be removed all together. Unsecured credit cards are the most popular form of card. These work like charge cards if you pay them in full every month—there is no interest charged. If you carry a balance, your balance and new charges are subject to interest. Your monthly payment is generally fixed at 2% of the balance. Debit cards are somewhat like a type of secured credit card, but they are really not credit cards. When you use a debit card, your bank debits your checking account and sends the money to the merchant. Where a secured credit card first looks to your monthly payment, then to the security for payment of the debt; a debit card will look first to the security then send you an overage bill. Additionally, debit cards will not report to the credit agencies, like most secured cards will. An automatic teller card is the most popular form of a debit card, with Visa check cards rapidly gaining momentum. Visa reported that in 2003 debit card transactions surpassed credit transactions for the first time ever, by over $30 Million. Debit cards have less fraud protection than credit cards, since it's harder for the banks to recover the money once it's paid out of your account. While your risk is still only $50, you really do rely upon the bank to put the money back into your account. This is a process that takes some time, and could put you in hardship for other expenses. |
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