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The best known credit card brands are Visa and MasterCard. The first credit
card was a Diners Card, it was issued to 200 people in 1951, and was accepted
in just 27 restaurants in New York!
Nowadays,
almost everyone with an income has one, and they can be used just about
anywhere.
Did you know...
Britain is the only country in Europe with more credit cards than people?
The reason
why people need them is that at times you have to spend more money than
you have in your bank account - this is often the case around the festive
season. So this money has to come from somewhere.
Banks can give you a loan, but they are expensive. So, a better option
is to use a credit card. When you apply for one, the bank (or credit card
company) will do a ‘credit check’, and if you qualify, they
will send you a card. Most credit card companies charge an annual fee
for this service.
How it all works...
Have you noticed that when someone pays with a credit card, the first
thing that happens is the shop assistant swipes the card and enters the
amount? Sometimes they will now also have to enter a PIN (Personal Identification
Number) - for added security.
This is the
shop getting authorisation from the credit card company that the card
is valid and has enough money available to pay for the goods. At the end
of the month, the company sends the holder of the card a bill for the
money spent. It also pays the retailer or shop.
What’s
the deal...?
What someone has done by using a credit card, is to borrow money from
the credit card company. Don’t think this credit is for free though
- payment by credit card costs: sometimes, a monthly fee, and always interest
if the credit card holder doesn’t pay the monthly bill in full and
on time.
People often
forget how much money they have borrowed, because this system is so easy,
and some people spend a lot more then they can afford. So, it is very
important to keep an eye on your spending and check your bills regularly.
MERRY CHRISTMAS...
and don’t forget to thank your friends and family when you unwrap
your gifts!
By
Axel Kirstetter, Financial expert.
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