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Credit Cards

History of the Credit Card

Money has come a long way since the age of bartering to the age of instant electronic transfers. In past centuries people exchanged goods of similar value, and in fact this is still done today in some communities. Then objects such as shells or precious metals were used instead of large amounts of goods, which led to coins. The first coins minted were in the Middle East in the 7th.century BC. Then the Chinese, in the 9th.century AD, invented written paper promises, as a much cheaper and lighter alternative to metal coins. The first recorded use of a 'cheque' was in London in the 17th.century. In the 19th.century electrical transmission by telegraph was introduced. In 1914, Western Union produced the first payment card, which led to automated banking, international payment cards and electronic money transfers. Nowadays you can pay using a credit card in person, over the phone, or even your television set. You can also send money straight to another card holder's account.

Credit Cards

Credit cards allow you to pay for goods and withdraw money (although it is recommended that you withdraw cash from your bank account using your debit card free of charge).

If you have a poor credit rating, obtaining credit cards can improve it. Some credit card companies will grant you a card even if you have no credit rating.

Issued by banks, credit cards are often obtained through other organisations (such as a retail chain) and most use either Visa or Mastercard.

Visa is an association consisting of 21,000 banks and other financial organisations worldwide, it is these financial organisations you need to contact if you want a Visa card. These Visa members are card issuers, setting interest rates, fees and choosing any extras, such as insurance or discounts with particular retailers. More than 20 million places accept Visa.

With a Visa or Mastercard credit card in your hand, the world is open to you. Whatever you need, wherever you are, you will find the familiar Visa and Mastercard signs, from the shopping centre to the Internet. Europe is the most advanced internet region, with 190 million people on-line in just one day, and billions are spent with on-line retailers. Interactive digital TV is expected to become the most common way for Europeans to pay on-line, to buy things you have seen in a commercial or a programme, or even to pay household bills, all using your credit card.

Abroad

Credit cards are accepted worldwide and can be used to buy goods in person, on the internet or over the phone, but check if using abroad as to whether extra charges will be applied. Also, you may not get very good exchange rates. Usually there is a sign or logo belonging to your credit card on display, for example on the window, in places that accept your credit card.

Credit cards are safer and easier to carry than cash. Credit cards are accepted at most shops, hotels, restaurants and other places in the world. Sometimes your credit card can get you great deals on hotels, restaurants, car hire, airlines, etc.

If you need cash and you have a Visa card, you can get local currency from more than 855,306 cash machines in Visa's global network, with more than 260,000 in Europe. A Visa card is the nearest to a world's common currency. Both Visa and Mastercard have on-line ATM locators

Statements

The balance is how much you have borrowed up to your credit limit. Providing you do not exceed your credit limit (which is usually at least £500), then it is up to you exactly how you use your credit card. The statement will show each individual transaction, but the interest won't be added until the following month. This means that if you pay off your balance in full you won't have to pay any interest.

At the other end of the scale, there will be a minimum amount to pay, which will either be a fixed amount or a percentage, whichever is the greatest. You can arrange for a direct debit to pay this minimum.

If you don't pay on time, or if you exceed your limit, the credit card company will charge you greatly.

Credit card companies charge retailers for use of credit cards, which is why, with some smaller retailers, you can pay less for cash.

Bills Made Easy

No more cheques, late payment fees or postage costs, and more time to relax, can be achieved by pre-authorising participating companies to automatically charge your credit card on a regular basis. It's easy to set up, and payments can be taken out monthly, weekly, quarterly, etc. You can either arrange for fixed amount or a fluctuating amount.

Competition

There are a large number of credit card companies, each desperate for your custom, so they offer various advantages. Some include travel insurance, some offer loyalty bonuses in the form of air miles or cash back, and some offer periods of interest free credit.

Many offer protection against loss, theft or damage of goods obtained on the credit card, with some credit card companies offering help to sort out disputes over goods, acting on your behalf if you have been a victim in this situation. For example, if you wish to return an item for a refund and the retailer won't let you, or if you never received the goods and the retailer won't refund your money. Even if the dispute resolves in your favour, you are still liable for any interest accrued on your credit card balance whilst the dispute was ongoing.

Be careful though, as sometimes the interest rates can be high with companies that offer lots of advantages.

0% Balance Transfers

As mentioned above, some offer periods of interest free credit. If you are paying off your credit card, then changing to a card offering 0% on balance transfers is an excellent option, as all of your payments will be going on the debt and not on the interest. These 0% interest periods usually range between 3 and 12 months. It is good to change your credit card to a different one offering this before the end of the 0% period, but it is still a good idea to compare the interest rate after the initial 0% interest, just in case you forget to change companies, or are unable to for any reason.

Caution

Beware of charges for exceeding your limit, or not making payments on time. Drawing out cash on your credit card attracts high charges and/or interest. Unscrupulous people can swipe your card and copy it, then sell the details on. Try to keep the credit card always in your sight and keep all your receipts. For example, when you have been out for a meal and you ask for the bill, then you put your credit card on the bill on the silver tray and wait for the waiter or waitress to come and take it away. Don't take all your credit cards out with you in case you lose your wallet or have it stolen.

You should always keep a record of what you have spent, where and when, as mistakes can happen. If you see any differences between your records and your statement, you should contact the company as soon as possible to get it sorted out.

Problems

If you lose your credit card, there is no need to panic, just follow some simple steps. The sooner you report the loss, the sooner your credit card can be replaced. You call you card issuer, usually on a dedicated 24 hour telephone number, which will be on your details in the package you received with your credit card, and give them your credit card number. They will immediately block your card and arrange for a replacement credit card to be sent to you. If you cannot lay your hands on the emergency number, then Visa or Mastercard (if your card uses one of these) will be able to help.

If you are having any problems paying your monthly payments, let your credit card company know as soon as possible, as they will be more sympathetic. If you have temporary cash flow problems, it may be wise to transfer your balance to another credit card company offering 0% or a low rate of interest initially until your finances are sorted.

If you are having a long-term problem with repayments, then a personal loan, or a debt consolidation loan, may be better alternatives, as these would allow you to have a more manageable monthly payment for paying off the debt.

If you don't let your credit card company know your situation, this could adversely affect your credit rating.

The Future

Multifunction chip cards are the cards of the future, being used to replace cash, receipts, debit and credit cards, special offer vouchers, reward coupons and loyalty cards, travel and show tickets, keys, insurance certificates and much more. The concept has been successfully tested in America and Asia, and should be coming to Europe soon.

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