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.