The term "credit card" was invented long before credit cards came into existence. An 1888 novel by Edward Bellamy fantasized about the future of the world. In his brave new world, Bellamy envisioned a society where cash had been replaced by "credit cards" which allowed the issuer to purchase "whatever he desires, whenever he desires it."
Bellamy's vision is not all that unrealistic one century later. Americans charge more than $200 million a year on credit cards. More than eighty percent of all households have credit cards. Some twenty-five thousand different credit cards are available in America alone.
Americans had very few choices for payment of purchases until the mid-twentieth century. According to an American Heritage article (November 1991), the craze towards credit cards began in 1950 with a disgruntled businessman.
That year businessman Frank X. McNamara finished a New York City meal only to find he had no cash to pay for his food. Credit cards for restaurant purchases did not exist. An embarrassed McNamara had to wait while his wife rushed to the restaurant with cash. As a result of this incident, McNamara and a partner founded Diners Club.
The variety of credit cards today is mind-boggling. Better known cards include MasterCard, Visa, and American Express. Stores, restaurants and telephone companies issue their own cards. "Affinity group" cards are issued with the name of specific organizations such as clubs, alumni associations, and unions.
Despite the great variety in appearance, most credit cards issued by banks fall into two categories: (1) those with high interest rates and no annual fee or (2) those with low interest rates and an annual fee. Each type of card is best for specific consumers, depending on payment habits.
If you pay your credit card bill each month in full, the high interest rate, no annual fee card is best. As you pay off your balance each month, the interest rate won't apply to you (provided there is a grace period in which to pay your bill with no interest charge.)
On the other hand, some purchasers tend to finance purchases by allowing a balance to carry from month to month. If you are such a purchaser, then a low interest rate, annual fee card is best for you.
As interest rates and annual fees vary, it is best to shop for credit cards. Annual fees can vary from almost none to $35.00. Interest rates also vary dramatically, as some states have laws that prohibit card issuers from charging above certain interest rates. For example, Arkansas prohibits card issuers from charging interest of more than five percent above the Federal Reserve discount rate. As a result, some Arkansas credit card companies may have rates of approximately ten percent, and these are available to anyone in the United States who qualifies. On the other hand, credit card issuers that charge no annual fee may charge rates of up to twenty-five percent.
North Carolina usury laws prohibit cards issued in North Carolina from charging interest rates over eighteen percent. But beware: credit applications received in the mail may be from out-of-state card issuers not governed by North Carolina law.
As credit cards have become more common, so have credit cards scams. As recently reported in the Wall Street Journal, tough economic times result in even more credit card fraud and theft.
As it is impossible to completely protect your card information, be prepared in the event your information is stolen. The name and telephone number of credit card issuers should be easily available. Issuers can often cancel credit cards and issue new card numbers within minutes by telephone.
Dishonest individuals continually invent new strategies to steal by credit card. However, here are a few precautions that you can take to protect yourself:
|Tear-up or destroy all credit card applications received in the mail. Otherwise, someone finding an unused application may apply for your card at their address in your name.|
|When cleaning out files, old credit card statements should be destroyed. At some point old card statements should be discarded. However, the statements contain all the information needed by a thief to charge something by telephone to your account.|
|Never give your card number over the telephone to someone who has called you. Credit card companies do not call customers to confirm credit card numbers over the telephone. Companies giving out prizes do not call and ask for card numbers. Automatically be suspicious of anyone requesting credit card information over the telephone.|
|Notify the issuer if your monthly statement does not arrive on time. Crooks have successfully stolen statements from the mail and made charges before the consumer realizes there is a problem.|
|Be careful when giving credit card or calling card numbers in public. Push-button telephones have decreased the need to give these numbers verbally. However, some thieves use video cameras or binoculars to watch as consumers use push-button telephones. It is wise to shield the number pad from view. When rotary phones or other problems require saying your number, speak softly or call from a protected location.|
Tear up carbons of restaurant receipts or car rental agreements. Once again, the information needed by a thief can be salvaged from carbon copies. Never leave such documents where they can be easily obtained.
Articles are intended to provide general information and are not legal advice or a legal opinion. Specific questions should be directed to an attorney at Black, Slaughter & Black, PA., or to another lawyer.