Credit Cards

by Jim Slaughter

Updated from "If Bellamy Could See Us Now . . . He'd Advise Us To Be Careful" in The Business Weekly of the Greensboro News & Record

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 In his brave new world, Bellamy envisioned a society where cash had been replaced by "credit cards" which allowed the issuer to purchase "whatever he desires, whenever he desires it."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 150 years later. In 2022 Americans owed more than $1.11 trillion on credit cards total. There are 1.1 billion credit cards in the U.S. (83% of all Americans have one). 

Americans had very few choices for payment of purchases until the mid-twentieth century. According to an American Heritage article, 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, American Express, Capital One, and Discover. Stores, restaurants and certain companies also issue cards. "Affinity group" cards are issued with the name of specific organizations such as clubs, university alumni associations, airlines, hotels, or 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 $500. 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 thirty-six percent.

North Carolina usury laws prohibit cards issued in North Carolina from charging interest rates over eight percent, but explicitly allow consumers and creditors to "contract for a higher rate." Also, many credit cards are 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, telephone number or online contact informatino of credit card issuers should be easily available. Issuers can often cancel credit cards and issue new card numbers within minutes.

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 paper files, old credit card statements should be destroyed. At some point old card statements should be discarded. However, the statements often contain information needed for someone else to charge something 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.
  • 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 realized there was a problem.
  • Be careful when giving credit card or calling card numbers in public. 
  • Destroy duplicates of restaurant or merchant receipts. Once again, the information needed by a thief might be shown on the receipt. 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 Law Firm Carolinas or to another lawyer.

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