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A brief history of credit cards
Credit cards were not invented on a blank sheet of paper. They gradually evolved out of the payment card industry and through the growth of consumer credit.
Attitudes towards consumer debt gradually changed throughout the twentieth century. At the beginning of the century it was not seen as respectable to use debt to finance the purchase of consumer goods. It was done, but it was seen as the mark of a respectable person that they did not go into debt. This was not a fixed attitude as it had been acceptable to buy a house with a mortgage (as middle class status was often tied up with property ownership) and in the 1920s with the growth of the motor car and many electrical goods there was a growth of consumer credit.
The immediate predecessor of the credit card was the revolving line of consumer credit. This was a line of credit that many middle class families, particularly those with a salary, or an unstable, sales based income, could buy goods and pay for them later. These lines of credit often interest being charged.
At the same time charge cards were being developed. These cards were not credit cards as we know them now as they were either supported by a bank account or they had to be settled in full when the monthly bill arrived. The first charge card that went beyond a single store was the Diners Club card that was used in New York restaurants, but later spread to restaurants throughout the word. The first Diners Club charge card was made of cardboard.
American Express soon took the idea. American Express had always been an innovator in financial services, and had invented the first travellers’ cheque. The payment card was a natural extension of their existing travellers’ cheque network and American Express started to be accepted in hotels, restaurants and garages around the world which had previously accepted travellers’ cheques.
Marrying the payment card with the revolving line of credit was tried by a number of banks. The first bank to do this successfully was Bank of America in California. They decided to launch their product in Fresno, California where they had a very high market share already. They launched the card by mailing a large cross section of their Fresno customers with a pre-approved credit card. This quickly took off and soon became the Visa card.
The predecessor of the Mastercard was also started in California as competition for Bank of America. This was the first card co-operative (a model Visa would follow) as the constituent banks realised that none of them were big enough to successfully have a credit card on their own.
When Did Australia First Get Credit Cards?
With almost everyone having at least one credit card in their wallets it is often surprising for people to realise this kind of plastic is still relatively young.
In fact, credit cards were first introduced in Australia in 1974 by Bankcard, making this form of credit just 37 years old.
Prior to their introduction, credit cards were something only a few Australians were familiar with, specifically those who had travelled to America.
Within 18 months of Bankcard and the Commonwealth Bank launching credit cards there were 1,054,000 Australian cardholders and 49,000 merchants accepting credit across the country.
The trend towards credit and other card payment methods has climbed higher and higher into the millions of cards that now sit in our purses and wallets.
Bankcard itself was closed down in 2006 as competition between the local-only brand and internationally accepted brands like MasterCard and Visa came to a head.
At the time, a spokesperson for Bankcard said that while the brand had set Australia off on a path towards cashless payments, the market had become far more sophisticated over time and Bankcard had lost its appeal.
This sophistication also marked a change in the way that credit card provider’s operated, foreshadowing the rise in competitive features such as balance transfers, low rates, no annual fees and rewards programs.
These days credit cards are much easier to use, swap or cancel, making it even more important for providers to come up with features that will keep cardholder’s happy.
But the sacrifice for this financial convenience has come in the form of debt, with the Reserve Bank of Australia reporting the total owed at over $49.3 billion, or over $3000 per credit card earlier this year.
While credit may now be an ingrained part of everyday life, the wrong kind of card often leads to the kind of debt seen above, making it incredibly important to compare different options.
How to Settle Credit Card Debt Without a Debt Settlement Company
Consumers can save a significant amount of money by attempting to settle their credit card debt without the involvement of a debt settlement company. Not only do borrowers spare themselves the costs of the company’s services, but they will also avoid the possibility of having to repay the settlement company if they use their funds to settle the account, in effect making them a new creditor to which the borrower is beholden.
In order to independently arrange a settlement with their creditors, however, card holders must know how to negotiate with the banks and how to present themselves during the process. Below is a list of things the borrower can do to improve their chances of reaching a settlement.
Credit card holders should keep all relevant paperwork in front of them when they contact their lender. This includes their most recent bill along with a copy of past due notices. If the bank has offered a settlement, the settlement notice should be included, as it will undoubtedly be referred to during the conversation.
The borrower will also be better off if they come up with an amount for which they are willing to settle. This can include both a lump sum settlement as well as reduced monthly settlements. The rationale behind these amounts should be at the user’s ready, however, in case the bank requests to know how the borrower arrived at the figures.
The length of time the account has been overdue will determine the openness of a bank’s collection department toward a settlement. If the account has been in default for several months, the borrower should expect to fight long and hard to reach an agreement. If it has only been a month or two, the bank will be friendlier toward the suggestion of a settlement, even if they do not agree to it in the end. Regardless of how the bank reacts, the card user must stand firm.
When speaking with a collections representative, who refuses to entertain a settlement, borrowers must take great pains not to get frustrated or let their annoyance show. Instead, they are better off asking to speak to the representative’s supervisor. If the representative refuses to transfer the call, the borrower may have no option other than to end the call, making sure to be courteous as they do so.
It can improve the odds of successfully reaching a settlement if the borrower pushes for the removal of fees and penalties from the account, rather than a reduction or halving of the actual principal. Most often, the amount remaining after late fees, annual fees, overdraft fees, transaction fees, etc., is more manageable. This should always be the goal; never to eliminate the debt completely.