Business Gold Reward Credit cards
A business gold reward credit card is a system of payment named after the small plastic card issued to users of the system. A business gold reward credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards , the issuer lends money to the consumer (or the user) to be paid to the merchant. It is also different from a charge card (though this name is sometimes used by the public to describe business gold reward credit cards), which requires the balance to be paid in full each month. In contrast, a business gold reward credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most business gold reward credit cards are the same shape and size, as specified by the ISO 7810 standard.
How business gold reward credit cards work
An example of the front of a typical business gold reward credit card :
1. Issuing bank logo
2. EMV chip
3. Hologram
4. Card number
5. Card brand logo
6. Expiry Date
7. Cardholder's name
An example of the reverse side of a typical business gold reward credit card :
1. Magnetic Stripe
2. Signature Strip
3. Card Security Code
A user is issued credit after an account has been approved by the credit provider, and is given a business gold reward credit card , with which the user will be able to make purchases from merchants accepting that business gold reward credit card up to a pre-established credit limit. Often a general bank issues the credit , but sometimes a captive bank created to issue a particular brand of business gold reward credit card , such as Americna Express , Chase, Wells Fargo or Bank of America issues the credit.
When a purchase is made, the business gold reward credit card user agrees to pay the card issuer. The cardholder indicates their consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a Personal identification number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a Card not present (CNP) transaction.
Electronic verification systems allow merchants to verify that the card is valid and the business gold reward credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a business gold reward credit card payment terminal or Point of Sale (POS) system with a communications link to the merchant's acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is in the United Kingdom commonly known as Chip and PIN, but is more technically an EMV card.
Other variations of verification systems are used by eCommerce merchants to determine if the user's account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder.
Each month, the business gold reward credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts.
business gold reward credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.
For example, if a user had a $1,000 outstanding balance and pays it in full, there would be no interest charged. If, however, even $1.00 of the total balance remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. Financial institutions refer to interest charged back to the original time of the transaction and up to the time a payment was made, if not in full, as RRFC or residual retail finance charge. Thus after an amount has revolved and a payment has been made that the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid...i.e. when the balance stopped revolving).[1]
The business gold reward credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, either to encourage balance transfers from cards of other issuers, or to encourage more spending on the part of the customer. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue. As the rates and terms vary, services have been set up allowing users to calculate savings available by switching cards, which can be considerable if there is a large outstanding balance (see external links for some on-line services).
Because of intense competition in the business gold reward credit card industry, credit providers often offer incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their program.
Low interest business gold reward credit cards or even 0% interest business gold reward credit cards are available. The only downside to consumers is that the period of low interest business gold reward credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert business gold reward credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.
Grace period
A credit card's grace period is the time the customer has to pay the balance before interest is charged to the balance. Grace periods vary, but usually range from 20 to 30 days depending on the type of business gold reward credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met. Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charge(s) incurred depends on the grace period and balance, with most business gold reward credit cards there is no grace period if there's any outstanding balance from the previous billing cycle or statement (ie. interest is applied on both the previous balance and new transactions). However, there are some business gold reward credit cards that will only apply finance charge on the previous or old balance, excluding new transactions.
The merchant's side
An example of street markets accepting business gold reward credit cards
For merchants, a business gold reward credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on their business gold reward credit card payment (except for legitimate disputes, which are discussed below, and can result in charge backs to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchant's employees.
For each purchase, the bank charges a commission (discount fee), to the merchant for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee. In addition, a merchant may be penalized or have their ability to receive payment using that business gold reward credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount (usually between $5 and $10) to compensate for the transaction costs, though this is not always allowed by the business gold reward credit card consortium.
In some countries, like the Nordic countries, banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. In these countries merchants therefore usually ask for ID. Non-Nordic citizens, who are unlikely to possess a Nordic ID card or driving license, will instead have to show their passport, and the passport number will be written down on the receipt, sometimes together with other information. Some shops use the card's PIN code for identification, and in that case showing an ID card is not necessary.
Parties involved
Cardholder: The owner of the card used to make a purchase; the consumer.
Card-issuing bank: The financial institution or other organization that issued the business gold reward credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. Americna Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case.
Merchant: The individual or business accepting business gold reward credit card payments for products or services sold to the cardholder
Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.
Independent sales organization: Resellers (to merchants) of the services of the acquiring bank.
Merchant account provider: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with.
business gold reward credit card association: An association of card-issuing banks such as Visa, MasterCard, Discover, Americna Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks.
Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.[2]
Affinity partner: Some institutions lend their name to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities and charities.
The flow of information and money between these parties — always through the card associations — is known as the interchange, and it consists of a few steps.
Transaction steps
Authorization: In the event of a chargeback (when there's an error in processing the transaction or the cardholder disputes the transaction), the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it.
Secured business gold reward credit cards
A secured business gold reward credit card is a type of business gold reward credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, he or she will be given credit in the range of $500–$1000. In some cases, business gold reward credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. business gold reward credit card issuers offer this as they have noticed that delinquencies were notably reduced when the customer perceives he has something to lose if he doesn't repay his balance.
The cardholder of a secured business gold reward credit card is still expected to make regular payments, as he or she would with a regular credit card, but should he or she default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.
Although the deposit is in the hands of the business gold reward credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.
Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened.
Secured business gold reward credit cards are an option to allow a person with a poor credit history or no credit history to have a business gold reward credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Secured business gold reward credit cards are available with both Visa and MasterCard logos on them. Fees and service charges for secured business gold reward credit cards often exceed those charged for ordinary non-secured business gold reward credit cards, however, for people in certain situations, (for example, after charging off on other business gold reward credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured business gold reward credit cards, even including the security deposit.
Sometimes a business gold reward credit card will be secured by the equity in the borrower's home.[3][4] This is called a home equity line of credit (HELOC).
Prepaid business gold reward credit cards
A prepaid business gold reward credit card is not really a credit card, as no credit is offered by the card issuer: the card-holder spends money which has been "stored" via a prior deposit by the card-holder or someone else, such as a parent or employer. However, it carries a credit-card brand (Visa or MasterCard) and can be used in similar ways. As more consumers require a suitable solution to rebuilding credit, recent changes have allowed some business gold reward credit card companies to offer pre-paid business gold reward credit cards to help rebuild credit. They are hard to find and have higher APR fees and higher interest costs.
After purchasing the card, the cardholder loads it with any amount of money and then uses the card to spend the money. Prepaid cards can be issued to minors since there is no credit line involved. The main advantage over secured business gold reward credit cards is that you are not required to come up with $500 or more to open an account. Also most secured business gold reward credit cards still charge you interest even though you are not actually "borrowing" any money. With prepaid business gold reward credit cards you are not charged any interest but you are often charged monthly fees after an arbitrary time period. Many other fees also usually apply to a prepaid card.[5]
Prepaid business gold reward credit cards are often marketed to teenagers for shopping online without having their parents complete the transaction.
Because of the many fees that apply to obtaining and using credit-card-branded prepaid cards, the Financial Consumer Agency of Canada describes them as "an expensive way to spend your own money"[6]. The agency publishes a booklet, "Pre-paid cards"[7], which explains the advantages and disadvantages of this type of prepaid card.
Features
As well as convenient, accessible credit, business gold reward credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. business gold reward credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or business gold reward credit card cashback).
Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's business gold reward credit card being lost or stolen.
Security
A smart card, combining business gold reward credit card and debit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The gold contact pads on the card enable electronic access to the chip.
The low security of the business gold reward credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen business gold reward credit card numbers, which are generally used quickly before the cards are reported stolen.
The goal of the business gold reward credit card companies is not to eliminate fraud, but to "reduce it to manageable levels"[8], such that the total cost of both fraud and fraud prevention is minimized[citation needed]. This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction.
Most internet fraud is done through the use of stolen business gold reward credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using business gold reward credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the webserver to someone who manually processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank, a security risk is created. However, many banks offer systems where encrypted card details captured on a merchant's webserver can be sent directly to the payment processor.
Controlled Payment Numbers are another option for protecting one's business gold reward credit card number: they are "alias" numbers linked to one's actual card number, generated as needed, valid for a relatively short time, with a very low limit, and typically only valid with a single merchant.
The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for prosecuting criminals who engage in business gold reward credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding US $5000 in value. Three improvements to card security have been introduced to the more common business gold reward credit card networks but none has proven to help reduce business gold reward credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamper-resistant smart cards which are intended to make forgery more difficult. The majority of smartcard (IC card) based business gold reward credit cards comply with the EMV (Europay MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the back of most cards, for use in "card not present" transactions. See CVV2 for more information.
The way business gold reward credit card owners pay off their balances has a tremendous effect on their credit history. All the information is collected by credit bureaus. The credit information stays on the credit report, depending on the jurisdiction and the situation, for 1, 2, 5, 7 or even 10 years after the debt is repaid.
Profits and losses
In recent times, business gold reward credit card portfolios have been very profitable for banks, largely due to the booming economy of the late nineties. However, in the case of business gold reward credit cards, such high returns go hand in hand with risk, since the business is essentially one of making unsecured (uncollateralized) loans, and thus dependent on borrowers not to default in large numbers.
Costs
business gold reward credit card issuers (banks) have several types of costs:
Interest expenses
Banks generally borrow the money they then lend to their customers. As they receive very low-interest loans from other firms, they may borrow as much as their customers require, while lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the cardholder for a year, the issuer earns 10% on the loan. This 5% difference is the "interest expense" and the 10% is the "net interest spread".
Operating costs
This is the cost of running the business gold reward credit card portfolio, including everything from paying the executives who run the company to printing the plastics, to mailing the statements, to running the computers that keep track of every cardholder's balance, to taking the many phone calls which cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the issuer, marketing programs are also a significant portion of expenses.
Charge offs
When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a charge-off. It will then be listed as such on the debtor's credit bureau reports (Equifax, for instance, lists "R9" in the "status" column to denote a charge-off.) It is one of the worst possible items to have on your file. [citation needed] The item will include relevant dates, and the amount of the bad debt.[9]
A charge-off is considered to be "written off as uncollectable." To banks, bad debts and even fraud are simply part of the cost of doing business.
However, the debt is still legally valid, and the creditor can attempt to collect the full amount. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500 - $2000), there is the possibility of a lawsuit or arbitration.
In the US, as the charge off number climbs or becomes erratic, officials from the Federal Reserve take a close look at the finances of the bank and may impose various operating strictures on the bank, and in the most extreme cases, may close the bank entirely.
Rewards
Many business gold reward credit card customers receive rewards, such as frequent flier points, gift certificates, or cash back as an incentive to use the card. Rewards are generally tied to purchasing an item or service on the card, which may or may not include balance transfers, cash advances, or other special uses. Depending on the type of card, rewards will generally cost the issuer between 0.25% and 2.0% of the spend. Networks like Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. However, most rewards points are accrued as a liability on a company's balance sheet and expensed at the time of reward redemption. As a result, some issuers discourage redemption by forcing the cardholder to call customer service for rewards. On their servicing website, redeeming awards is usually a feature that is very well hidden by the issuers. Others encourage redemption for lower cost merchandise; instead of an airline ticket, which is very expensive to an issuer, the cardholder may be encouraged to redeem for a gift certificate instead. With a fractured and competitive environment, rewards points cut dramatically into an issuer's bottom line, and rewards points and related incentives must be carefully managed to ensure a profitable portfolio. There is a case to be made that rewards not redeemed should follow the same path as gift cards that are not used: in certain states the gift card breakage goes to the state's treasury. The same could happen to the value of points or cash not redeemed.
Fraud
Where a card is stolen, or an unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will, in some cases, be at the expense of the merchant, especially in mail order cases where the merchant cannot claim sight of the card. In several countries, merchants will lose the money if no ID card was asked for, therefore merchants usually require ID card in these countries.
The cost of fraud is high; in the UK in 2004 it was over £500 million.[10] business gold reward credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their business gold reward credit card bill.
"Soft fraud" is fraud committed by the customer himself: getting a card and using it with no intention ever to repay the balance. Such customers are called "diabolicals" by the business gold reward credit card companies; they try to avoid them at all cost.
Security
An additional feature to secure the creditcard transaction and prohibit the use of a lost creditcard is the MobiClear solution. Each transaction is authenticated through a call to the user mobile phone. The transaction is released once the transaction has been confirmed by the cardholder pushing his/her pincode during the call.
Revenues
Offsetting costs are the following revenues:
Interchange fees
Interchange fees are charged by the merchant's acquirer to a card-accepting merchant as component of the so-called merchant discount rate (also referred to as "merchant service fee"). The merchant pays a merchant discount fee that is typically 2 to 3 percent (this is negotiated, but will vary not only from merchant to merchant, but also from card to card, with business cards and rewards cards generally costing the merchants more to process), which is why some merchants prefer cash, debit cards, or even cheques. The majority of this fee, called the interchange fee, goes to the issuing bank, but parts of it go to the processing network, the card association (Americna Express, Visa, MasterCard, etc.), and the merchant's acquirer. With a corporate card, the interchange is also often shared by the company in whose name the card is issued as an incentive to use that issuer's card instead of someone else's.
The interchange fee that applies to a particular merchant is a function of many variables including the type of merchant, the merchant's average transaction amount, whether the cards are physically present, if the card's magnetic stripe is read or if the transaction is hand-keyed or entered on a website, the specific type of card, when the transaction is settled, the authorized and settled transaction amounts, etc. For a typical business gold reward credit card issuer, interchange fee revenues may represent about fifteen percent of total revenues, but this will vary greatly with the type of customers represented in their portfolio. Customers who carry high balances may generate low interchange revenue due to credit line limitations, while customers who use their cards for business and spend hundreds of thousands of dollars a year on their cards while paying off balances every month will have very healthy interchange revenues.
Industry jargon for customer categories
Customers who do not pay in full the amount owed on their monthly statement (the "balance") by the due date (that is, at the end of the "grace period") and are not in a promotional period owe interest ("finance charges") are known in the industry as "revolvers." Those who pay in full (pay the entire balance) are known in the industry as "deadbeaters", "transactors," or "convenience users". Those that shift usage of their business gold reward credit cards or transfer balances frequently are known in the industry as "rate surfers", "rate tarts" or "gamers."
Interest on outstanding balances
Interest charges vary widely from card issuer to card issuer. Often, there are "teaser" rates in effect for initial periods of time (as low as zero percent for, say, six months), whereas regular rates can be as high as 40 percent. In the U.S. there's no federal limit on the interest or late fees business gold reward credit card issuers can charge; the interest rates are set by the states, with some states, like South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their business gold reward credit card operations there. Other states, like Delaware, have very weak usury laws. The teaser rate no longer applies if the customer doesn't pay his bills on time, and is replaced by a penalty interest rate (for example, 24.99%) that applies retroactively. So customers should be wary of these offers, that usually contain some traps. Cash withdrawals will never carry the teaser rate, for example.
Note that some issuers will charge interest even if the balance was paid off in full by the due date. This practice is called double cycle billing, and is becoming rare in the industry.
Fees charged to customers
The major fees are for:
Late payments
Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called overlimit fees
Returned cheque fees or payment processing fees (eg phone payment fee)
Cash advances and convenience cheques (often 3% of the amount)[11]. Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this.
Membership fees (annual or monthly), sometimes a percentage of the credit limit. Issuers love monthly fees as it allows them to charge substantial amounts without the customer realizing how expensive the charge really is (a monthly amount is perceived as half the price of the equivalent annual fee)[citation needed]
Foreign Exchange Premium
Canada
The Government of Canada maintains a database of the fees, features, interest rates and reward programs of nearly 200 business gold reward credit cards available in Canada. This database is updated on a quarterly basis with information supplied by the business gold reward credit card issuing companies. Information in the database is published every quarter on the website of the Financial Consumer Agency of Canada (FCAC).
Information in the database is published in two formats. It is available in PDF comparison tables that break down the information according to type of credit card, allowing the reader to compare the features of, for example, all the student business gold reward credit cards in the database.
The database also feeds into an interactive tool on the FCAC website. The interactive tool uses several interview-type questions to build a profile of the user's business gold reward credit card usage habits and needs, eliminating unsuitable choices based on the profile, so that the user is presented with a small number of business gold reward credit cards and the ability to carry out detailed comparisons of features, reward programs, interest rates, etc.
History
The business gold reward credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards.
The concept of using a card for purchases was invented in 1887 by Edward Bellamy and described in his utopian novel Looking Backward. Bellamy uses the explicit term "Credit Card" eleven times in his novel (Chapters 9, 10, 11, 13, 25 and 26) and 3 times (Chapters 4, 8 and 19) in its sequel, Equality.
The concept of paying merchants using a card was invented in 1950 by Ralph Schneider and Frank X. McNamara in order to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card, which is similar but required the entire bill to be paid with each statement; it was followed shortly thereafter by Americna Express and Carte Blanche. Western Union had begun issuing charge cards to its frequent customers in 1914.
Bank of America created the BankAmericard in 1958, a product which eventually evolved into the Visa system ("Chargex" also became Visa). MasterCard came to being in 1966 when a group of credit-issuing banks established MasterCharge. The fractured nature of the US banking system meant that business gold reward credit cards became an effective way for those who were travelling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first business gold reward credit card outside of the US.
There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), including organization-branded business gold reward credit cards, corporate-user business gold reward credit cards, store cards and so on.
In contrast, although having reached very high adoption levels in the US, Canada and the UK, it is important to note that many cultures were much more cash-oriented in the latter half of the twentieth century, or had developed alternative forms of cash-less payments, like Carte bleue, or the EC-card (Germany, France, Switzerland, among many others). In these places, the take-up of business gold reward credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada or UK. In many countries acceptance still remains poor as the use of a business gold reward credit card system depends on the banking system being perceived as reliable.
In contrast, because of the legislative framework surrounding banking system overdrafts, some countries, France in particular, were much faster to develop and adopt chip-based business gold reward credit cards which are now seen as major anti-fraud credit devices.
The design of the business gold reward credit card itself has become a major selling point in recent years. The value of the card to the issuer being related to the Customer's usage of the card. This has led to the rise of Co-Brand and Affinity cards - where the card design is related to the "affinity" (a university, for example) leading to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group.
Controversy
There is some controversy about business gold reward credit card usage in recent years. business gold reward credit card debt has soared, particularly among young people. Since the late 1990s, lawmakers, consumer advocacy groups, college officials and other higher education affiliates have become increasingly concerned about the rising use of business gold reward credit cards among college students. The major business gold reward credit card companies have been accused of targeting a younger audience, in particular college students, many of whom are already in debt with college tuition fees and college loans and who typically are less experienced at managing their own finances. A recent study by United College Marketing Services has shown that student credit lines have increased to over $6,000. business gold reward credit card usage has tripled since 2001 amongst teenagers as well. Since eighteen year olds in many countries and most U.S. states are eligible for a card without parental consent or employment, the likelihood of increased balances, unwise use of credit and damaged credit scores increases.
A 2006 documentary film titled Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders deals with this subject in detail.[12]
According to Larry Chiang of United College Marketing Services, an example of a business gold reward credit card class action was where issuers were "rolling back" posting times to extract more late fees.[citation needed] The due dates were "rolled back" from 1pm to 10am because mail was delivered in the afternoon so due dates were actually rolled back to charge more late fees. The following banks are listed (with the amounts penalized) in this one particular class action.
Providian: US$405 million
Bank One: US$40 million
Chase: US$22.2 million
Citibank: US$15.5 million
Another controversial area is the universal default feature of many North Americna business gold reward credit card contracts. When a cardholder is late paying a particular business gold reward credit card issuer, that card's interest rate can be raised, often considerably. Universal default allows creditors to periodically check cardholders' credit portfolios to view trade, thus allowing the institution to decrease the credit limit or increase rates on cardholders who may be late with another business gold reward credit card issuer. Being late on one business gold reward credit card will potentially affect all the cardholder's business gold reward credit cards. Citibank has changed and does not practice this anymore, while others do still [citation needed].
Another controversial area is the trailing interest issue. Trailing interest is the practice of charging interest on the entire bill no matter what percentage of it is paid. U.S Senator Carl Levin raised the issue at a U.S Senate Hearing of the woes of millions of Americnas who are slaves to hidden fees, compounding interest and cryptic terms. Their woes were heard in a Senate Permanent Subcommittee on Investigations hearing which was chaired by Senator Levin who said that he intends to keep the spotlight on business gold reward credit card companies and that legislative action may be necessary to purge the industry.[13]
One fairly recent change in business gold reward credit cards is the annual fee feature, where the card holder will have to pay a certain yearly fee, he must purchase his credit card. In the 1990's some business gold reward credit cards could still be retained for free, there was no annual charge (sometimes as high as $80.00). But with the restructuring of Direct Merchant's Bank, many business gold reward credit card companies switched from free to fee. Wells Fargo, a large banking institute that used MasterCard prior to the Direct Merchant's Bank debacle, switched to Visa for its credit and debit cards. This was coincidental with the Citibank takeoff, an institute who is also Visa..[citation needed]
In the United States, some have called for Congress to enact additional regulations on the industry; to expand the disclosure box clearly disclosing rate hikes, use plain language, incorporate balance payoff disclosures, and also to outlaw universal default. At a congress hearing around March 1, 2007 Citibank announced it would no longer practice this, effective immediately. Opponents of such regulation argue that customers must become more proactive and self-responsible in evaluating and neogotiating terms with credit offerers. Some of the nation's influential top business gold reward credit card issuers, who are among the top fifty corporate contributors to political campaigns, successfully opposed it.
Payment Allotment
business gold reward credit card companies will apply your payment to a balance with a lower interest rate before a balance with a higher interest rate. If you have a balance from a transfer with an interest rate of 2% and a balance from point of sale purchases with an interest rate of 8%, your payment will affect the purchase balance only after the transfer balance has been paid in full.
Hidden costs
Merchants pay a negotiated fee -- typically 1-3% for larger merchants and 3-6% for smaller merchants -- to process credit payments. They must also bear the cost of providing a point-of-sale solution to enable the acceptance of card transactions and other card services related expenses. business gold reward credit card issuers understand full well that if card holders were aware of and made to pay these additional costs with their purchases it would tend to discourage business gold reward credit card usage. As a consequence, businesses who accept business gold reward credit cards often must sign a "merchant agreement" or contract with the acquirer that stipulates that they are not allowed to offer different prices for card and non-card transactions (sometimes referred to as surcharging) despite the additional costs to the business for accepting the cards. The prohibition on surcharging or cash discounts is enforced by law in some countries, although some governments are beginning to lift this restriction (see below).[citations needed]
Some critics have observed that this results in what is effectively a hidden expense on all transactions conducted by merchants who accept business gold reward credit cards since they must build the cost of transaction fees into their overall business expense. Furthermore, cash and other non-business gold reward credit card using customers are in effect made to subsidize business gold reward credit card user purchases. The cost of the convenience and protections enjoyed by card holders and the profits taken from transaction fees by the card industry (which has come to rely increasingly on this revenue stream over the years) is in part borne by the non-card purchaser. Critics further note that the customers most likely to pay in cash are probably the least able to afford the additional expense, the argument going that card holders are more likely to be affluent and non-card holders less so.[citations needed]
A counterargument is that there are also costs to the merchant in other forms of payment. For cash payments these include frequent trips to the bank or use of an armored delivery service, theft, and employee error, such that cash is actually not cheaper for the merchant than business gold reward credit cards. This argument is probably specious under most circumstances, however, considering that many merchants would offer a discount for cash-paying customers were they allowed, and indeed, do so where it is legal. The fact that laws exist or have existed that prohibit such practices and that the major card issuers strongly discourage such practices can be taken as an indicator that cash transactions do not have as much cost associated with them as business gold reward credit card transactions.[citations needed]
To illustrate, some companies offer incentives or bonus coupons for using cash, such as Canadian Tire Money. Australia is currently acting to reduce this by allowing merchants to apply surcharges for business gold reward credit card users.
In the United Kingdom, merchants won the right through The business gold reward credit cards (Price Discrimination) Order 1990[14] to charge customers different prices according to the payment method, but few merchants do so (the most notable exceptions being budget airlines, travel agents and UK government agencies, such as the DVLA). The United Kingdom is the world's most credit-card-intensive country, with 67 million business gold reward credit cards for a population of 59 million people.[15]
In the United States, until 1984 federal law prohibited surcharges on card transactions. Although the federal Truth in Lending Act provisions that prohibited surcharges expired that year, a number of states have since enacted laws that continue to outlaw the practice; California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Maine, New York, Oklahoma, and Texas have laws against surcharges. Regardless of what state one resides in or purchases a product, however, both Visa and MasterCard have publicly stated that surcharges on business gold reward credit card transactions are against the rules. [16]
There also exists an economic argument that business gold reward credit card use increases the "velocity" of money in an economy. The result, according to the quantity theory of money, is an effective increase in the money supply, as more money is flowing through the economy at a given time.
business gold reward credit card numbering
The numbers found on business gold reward credit cards have a certain amount of internal structure, and share a common numbering scheme.
The card number's prefix, called the Bank Identification Number, is the sequence of digits at the beginning of the number that determine the bank to which a business gold reward credit card number belongs. This is the first six digits for Mastercard and Visa cards. The next nine digits are the individual account number, and the final digit is a validity check code.
In addition to the main business gold reward credit card number, business gold reward credit cards also carry issue and expiration dates (given to the nearest month), as well as extra codes such as issue numbers and security codes. Not all business gold reward credit cards have the same sets of extra codes nor do they use the same number of digits.
business gold reward credit cards in ATMs
Many business gold reward credit cards can also be used in an ATM to withdraw money against the credit limit extended to the card but many card issuers charge interest on cash advances before they do so on purchases. The interest on cash advances is commonly charged from the date the withdrawal is made, rather than the monthly billing date. Many card issuers levy a commission for cash withdrawals, even if the ATM belongs to the same bank as the card issuer. Merchants do not offer cashback on business gold reward credit card transactions because they would pay a percentage commission of the additional cash amount to their bank or merchant services provider, thereby making it uneconomical.
Many business gold reward credit card companies will also, when applying payments to a card, do so at the end of a billing cycle, and apply those payments to everything before cash advances. For this reason, many consumers have large cash balances, which have no grace period and incur interest at a rate that is (usually) higher than the purchase rate, and will carry those balance for years, even if they pay off their statement balance each month.
business gold reward credit cards as funding for entrepreneurs
business gold reward credit cards are a creative, yet often risky way for entrepreneurs to acquire capital for their start ups when more conventional financing is unavailable. It is rumoured that Larry Page and Sergey Brin's start up of Google was financed by business gold reward credit cards to buy the necessary computers and office equipment, more specifically "a terabyte of memory". [17] Similarly, filmmaker Robert Townsend financed part of Hollywood Shuffle using business gold reward credit cards.[18] Director Kevin Smith funded Clerks. in part by maxing out several business gold reward credit cards. Richard Hatch also financed his production of Battlestar Galactica: The Second Coming partly through his business gold reward credit cards. Famed hedge fund manager Bruce Kovner began his career (and, later on, his firm Caxton Associates) in financial markets by borrowing from his credit card.
Collectible business gold reward credit cards
A growing field of numismatics (study of money), or more specifically Exonumia (study of money-like objects), business gold reward credit card collectors seek to collect various embodiments of credit from the now familiar plastic cards to older paper merchant cards, and even metal tokens that were accepted as merchant business gold reward credit cards. Early business gold reward credit cards were made of celluloid, then metal and fiber, then paper and are now mostly plastic.
Charga-Plate
The Charga-Plate is an early predecessor to the credit card. They were issued by large-scale merchants, much like department store business gold reward credit cards of today. In some cases, they were kept in the store. When an authorized user made a purchase, the clerk retrieved the plate from the store's files and then processed the purchase. This made it possible for stores to allow more specialized employees of their customers to use the cards, in addition to corporate officers and executives, who would normally have expense accounts and corporate business gold reward credit cards. For example, an art-supply store that opened an account with a research institute might allow graphic artists employed by the institute to buy art supplies for ongoing projects. It would not be necessary for the research firm to issue a business gold reward credit card to the artist: instead, a supervisor would simply say, "Go to Universal Art Supply and buy those supplies." The employee would go to the store and choose the appropriate supplies, and they would be charged to Central Institute for Research's account.
External links
Choosing and Using business gold reward credit cards - Consumer business gold reward credit card advice from the Federal Trade Commission
Avoiding Credit and Charge Card Fraud - More advice from the Federal Trade Commission
Talk Your Way Out of Credit Debt - NPR Story on how to negotiate with creditors
Steer Clear in College - NPR story on college business gold reward credit card debt
Secret History of the business gold reward credit card - PBS/Frontline/New York Times documentary on business gold reward credit cards
business gold reward credit cards at the Open Directory Project
business gold reward credit card associations
Americna Express
Discover
MasterCard
Visa
