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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.

 

 

 

 

 

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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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