Introduction
The synthesis presented below has as its theme Credit Cards, which are currently widely used and important credit sales plans, since they provide the consumer with various privileges to obtain products and services on credit.
The objective of this work is to publicize everything related to credit cards or plastic money, and to carry it out, a series of subtopics will be developed, among which are: the concept of credit card, the origin and evolution of the credit card in the world and in the Dominican Republic; the description, classification, elements that compose it; the breadth and variety; the benefits, advantages and disadvantages of credit cards; the monetary implications they have and their importance today.
The information to be presented was obtained from various bibliographic sources, specifically newspapers, magazines and brochures from banking institutions in the country.
Credit cards are types of credit sales plans most used today, giving rise to a substitute for money, which is an element of high reward for the consumer and an identification that provides the privilege of obtaining products and services to credit.
Description
It is a means of payment without the use of cash, with automatic financing for thirty days, at no cost.
Origin and Historical Evolution of Credit Cards
The system of exchange or barter of merchandise prompted man to request credit for his agricultural activities from other people, who were generally representatives of the church. The fact described constitutes a classic case of financial intermediation that clearly illustrates the process of raising monetary resources. It is even more important to observe that 4000 years ago the main functions of a financial intermediary were defined, which were: Custody of funds, Transfer of funds and Granting of credit.
Financial intermediation appeared and flourished in different regions as agricultural or commercial activities took root and generalized in different parts of the world. Over time, modern banking emerged with institutions that exercised monetary intermediation, serving all customers who came mostly, individually.
Other industries apart from the purely financial one, gave rise to new systems of granting credit for the transfer of funds and the use of means of payment. During the colonial era, retail credit emerged in the United States as a result of a shortage of money, but it was not until 200 years later that the concept of credit was introduced.
As for the history of bank cards, it dates back to 1914 when Western Union issued the first credit card to the consumer, but in particular to its preferred customers. Until the first half of the century, other businesses such as hotels, department stores, and gas station companies issued credit cards for their customers.
After World War II, new cards emerged with renewed impetus. But it was only until 1950 when the Diners Club card came out, that the same credit card was accepted by a variety of merchants. In 1951 the Franklin National Bank of Long Island, New York, issued a card that was accepted by local businesses and shortly after around 100 banks. However, as these only worked for one area of local banking, "very few could generate sufficient profits for the banks, so many disappeared as quickly as they arose."
Building on those pioneers, local banks in the United States of America ventured into issuing their own credit cards as check substitutes.
In the 1960s, new deferred payment methods were offered in the balances to be paid, which offered additional income and greater profitability to the banks, which, united in associations or through agreements throughout the North American territory, were able to issue common credit cards, creating a national system, from which arose what today are large card firms that operate under the names of Mastercard International and Visa International, in the case of Visa, its antecedents go back to 1958 when the Bank of America began to issue the BankAmericacard credit card in the United States.
In other countries of the world, new card programs were launched, always managed by banks or associations of financial institutions, thus creating global systems of bank credit cards.
The creation of the bank credit card is only the last link in the evolutionary chain of the exchange of values. In addition to fulfilling the three main functions of a financial intermediary, since it transfers funds; It is a credit instrument and under the security aspects it contributes to filling the security custody function. It is also a fact that due to technological advancement and market growth, credit cards have ceased to be a class instrument to enter the mass market, which has created an increase in operations worldwide.
History of the credit card in the Dominican Republic
The Dominican Republic ventured into the area of credit cards since the 1960s, when the company Créditos Comerciales SA introduced the card of the same name to the market; also entered the American Express, for international use. Later, the Credit and Investments Company came out on the market with its "Services and Investments" card.
The Dominican Republic does not have a long history of credit cards. This service arose from the boom reached in other countries in the area and especially the United States of North America, which were its creators and then the own needs of the local market determined the development of this means of payment.
When Dominican investors saw the acceptance of the consuming public, new issuing companies were established, together with the commercial banks that entered this area. That was how the; Banco Condal Dominicano introduced the Condalcard card, later called Bankcard, to the market, this being the first Dominican bank card. Later, other banking institutions expanded the market by partnering with international card issuing institutions, the pioneer being Banco Popular Dominicano, with Visa and Mastercard cards.
Specifically, the case of Visa dates back to 1981, when the Classic credit card was issued in the country. While the Gold card was issued for the first time in 1985 and the Visa Electrom in 1996, through the National Credit Bank. The Business card was issued for the first time in 1991 by the Banco Popular Dominicano.
The existing competition between the different credit card issuing companies has made them offer a range of additional services to their customers, in order to attract more cardholders and have a greater volume of business. In addition to the fact that credit cards began to be endorsed by various financial groups, increasing competition and thus being able to bring greater and better services to the segments of the population that to date have made use of them and have led the use of plastic money available to the population that requires this service and has not yet used it.
Elements present in a Credit Card
- Client name Client number Name of Financial Institution Expiration Date Hologram Logo of the ATM Network or other services Signature Band Magnetic band, which is on the back and is a black band in which vital information about the company is recorded card. Information about the Issuer
Classification of Credit Cards
There are different types of cards due to their nature and their ultimate purpose. The first genre of these are divided into local and international, depending on their scope in terms of their ability to carry out transactions in a currency other than that of the country of origin.
In general, so-called International Credit Cards can be used to purchase items in any country in the world, while Local Credit Cards are limited to carrying out transactions merely in the currency and country of their issue.
There are also so-called Conventional Credit Cards, which are those that allow the user to pay for the consumption made through it, either through monthly installments and / or a revolving line of credit with the limit established by the issuing entity. If the full amount owed is paid at the end of the month, no interest is charged. Furthermore, however, if a credit balance is subtracted from the bank, it charges interest at a pre-established annual rate, which differs according to the issuing institution.
Within this group are also the Premier Cards, which are the same as the previous ones, but with higher credit limits, in addition to certain types of preference. These belong increasingly to a reduced market of users within the total market of cardholders. Another type are Corporate Cards that are issued in favor of a company or institution, the same as private credit cards, with which items can only be purchased within the issuing company.
The Visa company has designed a new type of card where the user can pay for the purchase of a good or service through the immediate debit by the bank to his personal checking account. The confirmations of these debits are made electronically, through the same system as conventional credit cards. In effect, a debit card works like a paperwork-free checking account.
Amplitude and Variety
- International MastercardInternational VisaInternational ClassicLocal ClassicGold InternationalGold LocalBusiness VisaBusiness MastercardDiscoverAmerican ExpressPlatinumGlobalLifiliationBankcardInvestibleLa monetariaCogofisaIntercardGold
Uses of Credit Cards
They are used in electronic media, ATMs, they are used as a means of security, in transactions through electronic commerce and it is also used as a requirement to provide cardholder information when they want to request any other type of credit to acquire some good or service.
Benefits of Credit Cards
Economic benefits:
- 30-day credit, automatic and without interest. Medium-term credit without interest. Automatic credit increase according to payment history.
Security benefits:
- You don't have to carry a lot of cash. Goods and services can be purchased up to credit limits. Personal protection against travel accidents.
Comfort and Speed:
- Allows cash from ATMs. Ease of payment of services through the telephone: water, electricity, telephone, fast food.
Flexibility:
- Allows reservation and rental of cars and hotels. Facility of financing through extra credit to test up to 25% free overdraft.
Prestige and Elegance:
- The cardholder is considered a moral and financially solvent person. It gives the user prestige and reliability.
Control:
- They allow the verification and control of the balance of the expenses incurred.
Advantages and Disadvantages for the user of Credit Cards
Advantages for the User:
1. Immediate credit is offered in numerous establishments throughout the country and of all kinds for the acquisition of goods and services, without there necessarily being any relationship between the cardholder and the affiliated establishment.
2. The replacement of cash handling and the use of checks by issuing a single monthly check.
3. The prestige that it brings to the user, since it constitutes a means of identification and reliability, it being understood that every holder of a credit card has been duly cleaned and can be considered an economically and morally solvent person.
4. It serves to improve your own money management.
5. For budgetary control, since with a single source of information or account statement it is possible to easily detect excesses in some lines and thus facilitate the rational management of the family budget.
6. The cardholder does not need to carry large sums of money, thus eliminating unnecessary risks and avoiding problems caused by non-acceptance of checks.
7. They serve to solve emergencies, illnesses, unexpected visits, improvised outings, anniversary or birthday gifts, as well as the supply of edible products and all kinds of needs in unforeseen situations.
Disadvantages for the User:
1. The loss of time in the transaction while authorizing the credit.
2. The possibility of fraud in cases of intentional misuse, theft or loss of the card.
3. Lack of control in user expenses.
4. Excessive use of financing, which is obviously making the original cost of the purchase increasingly more expensive.
Regarding the disadvantages that affiliated establishments could face, the following can be mentioned:
- The main disadvantage of the affiliated establishment when accepting the payment of invoices through the use of credit cards is that of not being able to convert invoices into cash in less than 48 hours, unless it has a bank account with the bank. card issuer, through which you can make a deposit of the amount of credit card transactions and draw on it almost immediately. Another disadvantage is the time incurred in the confirmation and approval of a loan requested by a potential client.
Monetary Implications of Credit Cards
Although it is pointed out that the credit card aggravates the inflationary process, since its use increases the consumption of services, it does not matter much that this demand is consistent or not with the production of the same, several aspects in which its incidence could be listed in financial economic activities it is very positive.
The expansion that traditional or non-traditional credit institutions have had in the Dominican Republic in recent times is notorious, channeling resources in the form of loans to all sectors of the economy. Within these, the same mechanism of the credit card has come to stop the monetary expansion, substituting sources of credit of lesser amount and placing in the hands of the users a potential credit and not real, whose destiny in case of being used will go to satisfy needs for consumer goods, and not create an expansion of working capital due to the diversion of resources to financial institutions.
The cost of handling plastic money tends to minimize financial expenses for all sectors involved in the operation, such as:
• Users: since the cost of processing the credit is very low due to the rapid granting, in addition to receiving it in the precise time; therefore, the opportunity cost is a preponderant factor.
• The Issuing Entity: expenses are lower due to automation and overcrowding in making credit decisions and reduction of operating expenses due to less handling of transactions with cash and checks.
• The Affiliates: due to the significant reduction in the granting of credit, the lower need for financing and the lower costs of billing paperwork. In addition, the monetary authorities have lower expenses due to the reduced handling of the currency.
Importance of Credit Cards
Today, credit cards have played a crucial role in contributing to the development of the economies of the most developed countries; to the extent that consumers have greater facilities for the acquisition of goods and services, demand is also growing in the different market sectors.
Another aspect that marks the importance of credit cards is the fact that they are used for the acquisition of all types of mass consumer goods, becoming a significant part of the household budget of many households. Hence, from symbols of high economic and social category, the famous credit cards have become a more common garment.
conclusion
At the end of this synthesis, it can be said that it is a fact that in one way or another credit cards are one of the most efficient instruments for streamlining business dynamics; since they have become an almost indispensable element for the management of all types of commercial operations and thus becoming, not only a symbol of social or economic status, but an effective companion and substitute for the traditional ballot or money cash.
It can also be concluded by saying that credit cards allow the carrying out of any type of commercial transaction or acquisition of goods or services both nationally and internationally; In addition, there is a wide variety of cards for private users.
Bibliography
- Reserve Bank of the Dominican Republic. Feasibility study for the installation and operation of a credit card project. Santo Domingo. March, 1988. Ortiz, Emilio. "Plastic money is imposed." The National. August 3, 1997. Page 15. «Card vs Money. The plastic that revolutionizes the world. Market Magazine. Year 3, Number 5. Pages 22-32.
