Credit cards

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The loan’s nature

in Credit cards, Economy and inflation, by admin

Credit relations appear with the occurrence of commodity production. Even before the money appearing as universal equivalent, when the exchange and the presence of trust between entities appear first credit transactions. The main feature of the loan is breaking in time from the alienation of the object of the transaction to repay liability incurred. For the period of deferment in time value passed in temporary possession of other hands and returns to the creditor within a specified period.
The most common “credit is the ability to receive goods or services in exchange for a promise to pay later or opportunity to receive money against pledge obligation to be paid later. ” To have a credit deal are necessary two members- creditor and borrower. Between their interests must have matched –  the creditor, loaning money and the borrower, requiring additional funds. They must be independent legal entities, and agree on the conditions guaranteeing the loan. Between creditors and borrowers must create economic relations, which have a material basis.

Forms in which occurs the loan are: 

  • 1. Commodity credit. It appears as: commercial and consumer.Commercial loan is the first historical form of the loan, which exists to nowadays. It is applied between the participants who maintain direct relationships with each other.Consumer credit is that which shall be provided by banks and merchants to the end users, and to satisfy consumer needs.
  • 2. Bank credit. It occurs later than merchandise credit. During the late Middle Ages, when banks appear as intermediaries of a credit relations with, and have a high level of development of money form of value, bank credit becomes the main form of credit relations. Banks became a creditor because they accumulate large cash capital.
  • 3. State credit .This type of loan is also provided in monetary form. Subjects in the credit transaction are: the state in the face of Ministry of Finance or the municipalities, which could be both creditors and debtors, legal and physical who may also be creditors or debtors. Major creditor of the state banks are public or private, in this including banks, IMF, World Bank, European Bank for Reconstruction and Development and more.
  • 4. Emission credits. This is a loan that shall be provided by the Central Bank through the issue, ie printing and release circulation of money. The issue of money increases the liability balance sheet liabilities of the Central Bank, as well as liabilities of the commercial banks, by way of increased borrowings in them. Through this credit increases credit resources in the economy. CB can lend at the expense of their own funds – primary and backup. Then We have a loan of the capital, which is directed at improving the production structure of the economy.
  • 5. Bond credit. Giving bond loans are made through the issuance of bonds of specific instruments in the financial market. Bonds are subject of sale on the secondary market, where owners selling them and receive cash requirements. This makes liquid bonds and demanded as a form of store of value and as a form of credit. The bond loan will be considered more advantageous than bank credit.
  • 6. International credit. It shall be provided both, in stock and in cash. Counter parties to credit are the State,banks, businesses and individuals. International credits carry overflow of capital from one national economy to another.

 

 

 

 

 

See: moody credit ratings

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The American Express international card

in Credit cards, by admin

The American Express international dollar card offers its clients the opportunity to use it in any country, and perform payments in local currency.  The monthly limit is the amount of the guarantee deposit, which is accrued by an interest rate determined at the purchase of a monthly deposit. Initially, the banks imposed credit cards with a minimum balance.  When using these cards the bank blocked a certain amount in the account.
Thus, the cardholder does not use credit, and is neither allowed to have the full amount on his account.  By blocking the minimum balance banks are insured as it is possible to perform payments of small amounts abroad, without even checking the balance of the credit card.  The minimum balance ensures that even if the customer spends money which he/she does not have, the banks will be able to recover the money from the blocked amount.

 

Valid American Express card signs

When the card has a minimum balance it apparently entirely loses its credit function.  However, such cards are being issued, as they can perform payments which cannot be performed with a debit card – transactions on the Internet, hotel reservations, car rental, payments for plane tickets, etc. The second step was for banks to offer their clients a card with no minimum balance, but a secured one through deposit.  It is difficult to talk about real credit outstanding features with this card as the amount of the credit used is smaller than or equal to the amount of the deposit.  In the early years of credit cards issuance it was difficult to find a bank offering a credit card with a credit which is bigger than 70% of the deposit amount.  Thus, the banks were rather cautious with customers and what they offered as credit cards was quite different from the traditional idea of the same product in developed countries.  We should also add here the ability to make payments on the Internet, although Internet transactions in Bulgaria are possible through debit cards by using the system ePay.bg. In recent years we have experienced a boom in consumer lending, which further raised the interest in credit cards.  Banks pay much more attention to consumer lending. The requirements for obtaining credit decreased, the list of necessary documents for applying was drastically reduced, the number of guarantors required decreased, the maximum loan amount increased, interest rates became quite acceptable.
Under these circumstances, credit cards have found their place in the growth of consumer credit.  The banks started issuing “real” credit cards, i.e.  cards with real credit limit with no minimum balance and deposit.  Banks started to offer charge cards, where the customer has a certain grace period within which he/she can enjoy an interest-free loan. Banks also started issuing grant and revolving cards which do not require full repayment of the debt and the latter can be repaid by installments, whereas the cardholder pays only the minimum monthly payment, which with different banks amounts to 5 – 10% of the authorized credit.

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The most commonly used international credit cards

in Credit cards, Debit cards, by admin

One of the most user-friendly policies is the policy of MasterCard and Visa, as their cards are issued worldwide. The MasterCard or Eurocard-MasterCard product is a credit card that is issued in three types. The first type is a Mass card (Mass) – a personal credit card with suspension.  Business Card (Business) is for preferred by the card-issuing bank customers with affordability to make payments worldwide and with recovery of the excess amount usually at the end of the month.

 

  • Gold Card (Gold) is for individual use with additional means of protection and convenience when traveling.  The credit line with a Gold Card depends on the client and is an important source of prestige. Visa cards are also three types.
  • The Classic Visa card (Visa Classic) is issued by banks that are members of Visa International.  The Visa Classic credit card is an effective and ultimate way for the user to obtain a preliminary credit.
  • The Visa Business card (Visa Business) is designed primarily for businessmen and offers additional services such as medical and legal assistance, travel insurance and more.
  • The Visa Gold Card (Visa Gold) has a significant purchasing power, thanks to a large credit limit, which is typically over 5000 USD.

The Visa Electron card is an electronic product used to carry out payment transactions from POS terminals. Those payments are authorized electronically by the card issuer or a card processor on behalf of the publisher.  Visa Electron cards can be linked to current accounts and can be used as debit cards or linked to credit limits and can be used as credit cards with accumulation suspension. All these types of card products can be used in an online mode and an offline mode, electronically or by paper (slip).  When carrying out transactions with these cards, the holder is authorized using a PIN-number or a signature, and those can be used with ATMs, POS terminals (hotels, restaurants, and shops), handheld terminals (imprinters) through slips or phone authorization.

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Different types of bank cards.

in Credit cards, by admin

Generally, bank cards can be divided to debit and credit cards.  Debit cards serve the bank accounts of the bank’s current customers and credit cards are essentially the type of consumer credit.  What is common between the two categories of cards is that they both are issued to physical and legal persons, while the bank can set limits to business cards and thus track company payments.
1.  The essence of credit cards
Credit cards issued by the issuer, are intended for use in the home country and abroad, and with them can be made non-cash payments for goods and services to retailers using POS terminal (or imprinter), withdrawing cash from ATMs (ATMs), marked with the brand, getting cash into financial institutions through a POS terminal or imprinter and other non-payment and reference operations.
A credit card can be issued to an individual cardholder as a physical person as described below:

  • Main – issued to the cardholder;
  • Family / Additional – through the lot of the holder, issued to third parties by order of the holder.
  • A credit card can be issued to the card holder as a legal entity as described below:
  • A primary card is issued to the name of legal entity;
  • Additional cards are issued to individual employees.

The credit card is authorized on the basis of a credit limit.  The issuer accepts to make payments by order of any cardholder at the maximum allowed amount of the debit balance on it.
Each card can be issued with a unique personal identification number (PIN).  The PIN-number is a combination of four digits generated by the issuer and may not be changed by the cardholder.  If a cardholder forgets his/her PIN or blocks it by three incorrect entries, the issuer, at the request of the cardholder, provides him/her with a new PIN-number.
All cards issued by the issuer are his exclusive property.  The cardholder is obliged to store the card and the PIN-number responsibly and keep them in different places at any time. The cardholder is obliged to protect the card from bending, breaking, demagnetizing and other mechanical damages.  Upon expiry of the validity of the card the cardholder must immediately return it to the publisher.
The card cannot be held by, transferred or made available to third parties in any other way. The card number must not be communicated to third parties except when making reservations and/or ordered payments or when required by a bank officer of the issuer’s bank.
When using the card for payment of goods and services the cardholder is required to verify the proof of payment, which is presented by the dealer (or printed electronically) and to sign it.  The signature on the document must match the signature affixed to the back of the card. By signing the proof of payment the cardholder certifies the amount of payment and instructs the issuer to record the payment amount in the account of the cardholder and to transfer the amount to the trader who accepts cards.  The Vendor has the right to ask the cardholder to verify his/her identity.

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