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50 Fun Facts About Credit Cards

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I was a little bored one day and thought I’d try to find fifty fun facts about credit cards that I didn’t know before hand and put them all in once place for you all to munch on and enjoy over the weekend. Some of the things I already knew, like the AMEX Centurion card has a $2500 annual fee and a $250,000 annual spend requirement, but others I didn’t, like how American Express started off as a shipping company and later branched out into financial services.

I broke the fun facts into these general categories: Historical Nuggets (with subcategories for each major card company), Useful Things That Make You Go Hmmmm…, Technobabbliciousness, Legal Ways You’ve Been Hosed & Un-Hosed, and Department of Holy Crap They Make A Ton of $$$$$. Historical Nuggets obviously covers the history of cards and the various companies. The Useful Things That Make You Go Hmmmm… covers some useful consumer information that may one day come in handy in your daily life. Technobabbliciousness covers some interesting facts about the technology behind credit cards. Legal Ways You’ve Been Hosed & Un-Hosed covers various court rulings and other legalese that explain why the environment is the way it is (like ridiculous fees and interest rates!). Finally, Department of Holy Crap They Make A Ton of $$$$$ is just a collection of mind-boggling statistics that should make you think twice about starting your own credit card company.

    Historical Nuggets

  1. In the beginning, credit cards were just charge accounts, offered by individual stores and only usable at those stores. The first credit card that could be used at multiple locations was offered by The Diner’s Club in 1950. (full story)
  2. Diners Club issued that first card to only two hundred customers and it could only be used at twenty seven restaurants in New York City.

  3. American Express History

  4. American Express started off as a shipping company in 1850, shipping products across the United States and capitalizing on the limited reach and slow speed of the United States Postal Service. Their main customers were banks and they shipped various financial instruments like stock certificates and other notes. They began selling money orders and traveler’s checks in 1882 and issued its first credit card in 1958. (full history)
  5. In 1984, American Express billed their Platinum Card as extremely exclusive and it had an annual fee of $250 ($484.84 in 2006 dollars). Today, the extremely exclusive card for American Express is their black Centurion card with a $2,500 annual fee! (and requirement to spend $250,000 a year)

  6. MasterCard & Visa History

  7. MasterCard and Visa are networks of banks and financial institutions. American Express is its own company and Discover Card is a subsidiary Morgan Stanley (who is spinning off the business).
  8. Visa was originally called BankAmericard, a card offered by Bank of America in 1958 in California. By 1970, they had created an association, called the National BankAmericard, Inc., of all the US Banks that issued the BankAmericard. It wasn’t renamed to Visa until 1976. (full history)
  9. Visa actually stands Visa International Service Association.
  10. The Visa logo colors were chosen because the blue represented the sky and the gold represented color of the hills in California where Bank of America was founded. (from Wikipedia).
  11. Originally formed under the name Interbank Card Association and they acquired the MasterCharge brand and logo in 1969. MasterCharge was originally formed by four California banks in 1967, who joined together to form the Western States Bankcard Association to battle the BankAmericard of Bank of America. MasterCharge was renamed MasterCard in 1979.
  12. In 1984, MasterCard was the first to use a hologram on its cards to deter fraud.

  13. Discover Card History

  14. Discover Card was introduced by Sears in 1985 and gained notoriety because it charged no annual fee.
  15. At the time, Sears also owned the brokerage Dean Witter Reynolds Organization and the Discover brand was integrated into that organization. When Dean Witter merged with Morgan Stanley in 1997, Discover went along for the ride.
  16. Useful Things That Make You Go Hmmmm…

  17. Wonder why minimum payments are so low? It allows consumer to carry more debt while keeping to the same low minimum payment. You can give someone with the ability to pay $100 per month a credit limit as high as $5,000 if they only had to pay 2% a month. If the minimum payment were 5%, they could only have a credit limit of $2,000. The lower the minimum payment, the deeper in debt someone could be in.
  18. It is against the merchant agreements of MC, Visa, and AMEX, for a vendor to require you to provide your phone number, home address, or other personal information for credit card transactions. In fact, some states make it illegal for them to require it. (It’s not illegal to ask, but it is if they refuse to process the transaction without that information)
  19. Under the merchant agreements of MC, Visa, Discover Card and AMEX, you do not need to present a driver’s license in order to complete a credit card transaction.
  20. Under the merchant agreements of MC, Visa, and Discover Card, vendors may not require a minimum purchase amount. Under AMEX, it’s more of a hint that the vendor shouldn’t put up any barriers to use but AMEX also has a discrimination rule, so if there is no minimum amount for MC/Visa, there cannot be a minimum amount for AMEX. (Consumerist has all the relevant merchant agreements consolidated)
  21. Under the merchant agreements of MC, Visa, and Discover Card, vendors may not charge a surcharge for using the card (the anti-discrimination rules still apply for AMEX). In some states, it is actually illegal to charge a surcharge for credit card purchases. This rule does not apply to government agencies.
  22. On the flip side, offering a discount for cash payment (over credit card payment) is permitted by all of the card companies (looooophole!).
  23. A merchant may, on taking a personal check, require that you offer a credit card number. It is against merchant agreements to charge a credit card in the event of a bounced check (and it’s also very dangerous to have all that juicy information on one little slip of paper, plus this may also be illegal in your state).
  24. You can lower your interest rate with a phone call. Credit card companies are like cell phone and cable companies, they’re afraid you’ll leave and join with one of their competitors. Use this to your advantage by comparing offers from other credit cards and bringing this information to your credit company.
  25. When you use your card, you agree to the cardholder agreement, you don’t have to sign anything. If you get an update to the agreement, you also agree to the updates once you use your card.
  26. A fixed interest rate on a credit card can change with only 15 days of notice. Fixed is not fixed in the sense that a mortgage loan is fixed, it’s fixed in the sense that the credit card company can change it with only 15 days notice!
  27. If you have multiple balances with different interest rates on one card, payments are generally applied to the balance with the lower interest rate. You will have no choice in the matter and you cannot request it be made to the higher balance. So if you have a $100 balance at 19.99% and a $5,000 balance at 4.99%, your payments apply to the $5,000 at 4.99% first. A note about this will be in your agreement.
  28. The credit card sale process works as follows: The vendor sends an authorization request for the value of the sale. The credit card company checks the card limit and reduces the credit limit by that amount (it puts a “hold” or a “block”) and sends the vendor electronic confirmation that the card is good. The vendor sends a deposit transaction or a sale transaction. The credit card company sends the money. This process is usually quick and painless… with the following exceptions:
  29. Hotels and rental car agencies usually send an authorization request for the estimated cost of your stay or rental and they keep this “block” on your card for 10 to 15 days (independent of how long you actually stay there) even if you pay with something else.
  30. When you use a credit card at a gas pump, the pump authorizes the purchase for something in the neighborhood of $50 first. So if you have less than $50 left on your limit, the pump will reject your purchase attempt.
  31. Restaurants typically will authorize a credit card purchase for the amount of the bill plus 25% (for gratuity), so again, if your limit can’t handle the extra 25%, the purchase transaction will be rejected.
  32. Technobabbliciousness

  33. Ever notice all your credit cards are of uniform shape and size? Their dimensions are governed by the ISO 7810 standard, an international standard for identification cards. Banking cards, as well as driver’s licenses and retail cards, follow ID-1 (passports follow ID-3). If your card has a smart chip, it follows ISO 7816, and if it has RFID, it follows ISO 14443.
  34. The expiration date on the card is “fake.” You can still use the card after its expiration date because the card number on your replacement will be the same. The reason why cards do expire varies from company to company but mostly it’s because the credit cards take a lot of abuse and just need replacing (they estimate the magnetic strip is good for only about three or four years of swiping).
  35. Interested to know what’s on the magnetic stripe? Check out this breakdown of the three tracks on Wikipedia (the rest of the page explains other magnetic stripes).
  36. There are generally two types of magnetic strips, high-coercivity and low-coercivity, with the high-coercivity being stronger and more durable (also requiring more expensive equipment to handle). (from Wikipedia)
  37. Higher-coercivity are usually black and low-coercivity strips are a dark brown, but there are special cases such as American Express’ patented silver colored magnetic strip.
  38. Hotel keys and other low-coercivity stripped cards are susceptible to being scrambled by a weak magnetic force, including cell phones.
  39. Credit card numbers conform to the Luhn algorithm, which is just a simple checksum test on the number. What you do is start from the right and double each second digit (1111 becomes 2121), then add them all together, and you should end with a number evenly divisible by ten. If it doesn’t, it’s not a valid credit card number.
  40. The first digit of the number is the Major Industry Identifier. 1/2 are for airlines, 3 is for travel/entertainment, 4/5 for banking and financial, 6 for merchandizing and financial, 7 for petroleum, 8 for telecommunications. 0 and 9 are for other assignments but you’ll likely never see them. If you look at an American Express card, you’ll see it starts with a 3, a throwback to their travel/entertainment roots.
  41. The first six digits will correspond to the issuer, including the major industry identifier. 34xxxx/37xxxx are for American Express, 4xxxxx is for Visa, 51-55xxxx is for MasterCard, and 6011xx is for Discover.
  42. The rest of the digits (except the last one, which is a checksum digit) is your account number.
  43. Legal Ways You’ve Been Hosed & Un-Hosed

  44. Minors, those under the age of 18, are not obligated to pay back any charges to their credit cards (unless a parent co-signs, but then its the parent who is on the hook) because they are not allowed to enter into a binding contract.
  45. If there are unauthorized charges on your card, you’re on the hook for $50 each, maximum (unless your agreement says you are responsible for less, you cannot be responsible for more). If you report your card missing and an unauthorized charge appears after you’ve reported it, you are liable for $0.
  46. By law, you are only allowed to dispute charges for “unsatisfactory goods or services” if you made the purchase in your home state or within 100 miles of your billing address and the purchase was for more than $50. (and if you’ve made a good faith attempt to resolve it with the vendor) While a credit card company may not hold you to this, they are protected by the law for purchases outside your home state/100 mile radius.
  47. Credit card companies are prohibited by law from sending you a card that you didn’t ask for, unless it’s a renewal or a substitute card. If you get a credit card you didn’t apply for, contact the Federal Trade Commission and file a complaint.
  48. A common clause in most user/member agreements is that the cardholder waives their right to sue the credit card company. The cardholder must instead go through a binding arbitration hearing with the credit card company and cannot take the company to court or participate in a class action suit.
  49. Before 1996 and the Supreme Court case Smiley vs. Citibank (517 U.S. 735, Thanks j), there were restrictions on how much a credit card company could charge for a late payment. The ruling in Smiley vs. Citibank lifted that restriction and fees that were once around $5-$10 jumped to $30 or more today.
  50. There is no federal law regulating the rate of interest a credit card company can charge! The federal government use to regulate but repealed those laws during the Great Depression and never put them back in place, they now rely on the states to handle usury.
  51. In the Supreme Court case Marquette National Bank v. First of Omaha Service Corp (439 U.S. 299, Thanks j) in 1978, the Court decided that national banks only need to follow the usury laws of the state they are headquartered in, not the state in which their customer resides.
  52. Credit card companies are all headquartered in states with high or no cap on interest rates. American Express is located in Utah (no cap), Bank of America is in Arizona (36%), Citibank is in South Dakota (no cap), Capital One is in Virginia (no cap), Providian is in New Hampshire (no cap), and JP Morgan Chase, MBNA (now Bank of America), Morgan Stanley/Discover, and HSBC are all located in Delaware (no cap).
  53. Department of Holy Crap They Make A Ton of $$$$$

  54. Each American household receives approximately 6 offers a month. The typical response rate is .33% (one third of one percent). You can opt out of these mailings via OptOutPrescreen.
  55. Each direct mailing acquisition costs approximately $80, according to R.K. Hammer, bank card advisory firm.
  56. Credit card companies earned $90.1B in interest in 2006, up from $89.4B the year before (according to R.K. Hammer).
  57. Credit card companies earned $55.2B in fees in 2006, up from $54.8B the year before (according to R.K. Hammer).

Bonus Fun Fact:

Mastercard’s market capitalization is a whopping $14.24B, American Express’s stands at $71.62B, and Morgan Stanley stands at $86.40B. Visa is not publicly traded (yet). While you can’t compare their market caps because such a large part of Amex and Morgan Stanley’s businesses are not in credit cards, it’s still interesting to look at the numbers. Incidentally, Bank of America has a market cap of $239.17B. (These figures as of 1/11/07)

{ 63 comments, please add your thoughts now! }

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63 Responses to “50 Fun Facts About Credit Cards”

  1. Kim says:

    Hey, Mr. Verizon, .0033% is not one-third of one percent. It is thirty-three ten thousandths of a percent.

    • mic says:

      He said “.33%” which IS “ONE THIRD OF ONE PERCENT.” It’s numeric value is 0.0033 just as the numeric value for 1% is 0.01
      Percent= Per + cent
      per = of
      cent = 100

      Congrats on pointing out that .0033% is thirty-three ten-thousandths of a percent. That’s what you get for trying too hard to be a smart*ss

  2. jim says:

    Whoops, nice catch. Why am I Mr. Verizon?

    Never mind, I remember now. :)

  3. laura says:

    You see #s 15 and 16 disregarded all of the time- I was at a bar in Cincinnati and a sign was posted about a $x charge for all CC purchases. The bartender said his boss knew of the merchant’s agreement, but chose to disregard it, even though many patrons had reported him to MC/VISA. I know there are significant charges to process CC transactions for a small business, but come on, write it off as a cost of doing business. Don’t pass it on to the (drunk) patrons who come to your bar.

    • Justin Pirnie says:

      Good for the merchant. The credit industry and more importantly the Federal Reserve have devalued the American dollar. We have created a punitive system of debt where a “dollar” is no longer worth a dollar. Ever been charged $8 by a bank for cashing a check because you don’t have an account? Billions of dollars are being funneled off to the wealthy so that we can “use” our own currency while they get fat on transaction fees.

      Use cold hard cash. You will drink less and you may make it home in one piece.

      • Hillery says:

        Wealthy? What happens to the bank’s cost of doing business and all of the bad check writers? Who repays the bank? Maybe that is where those fees went, huh? Did you ever think about how many bad checks go around out there???? It’s alot. Secondly, those credit card fees go towards those the account of who charge thier cards, then default on the loans… That fact is even more present in today’s age. The “weathy” is those who cheat lie and steal, the rest of are paying for their, “wealth”.

  4. also... says:

    for mail-order/internet goods, a merchant/vendor is not supposed to actually charge your card until the goods have been shipped, unless it is a custom order of some kind.

  5. Clever Dude says:

    Exceptional article Jim. Lists of things always keep me interested, and this list proved quite interesting and useful.

  6. Yan says:

    Excellent write up.

    #23 got me unexpected a few years back when I made a big 0% balance transfer and accidentally charged that card with a purchase. The bank kept charging interest on the purchase portion until I paid off the entire balance.

    #39 — very often my bank would reimburse all unauthorized charges.

    And a question. What is “App-O-Rama” in plain man language?

  7. jim says:

    An App-O-Rama is a term started by, I believe, a guy named SuckIsStaples at Fatwallet and it is basically a whirlwind application of credit cards within a very short time period. The premise of the app-o-rama is that credit card companies don’t report applications to the credit bureaus immediately so you can take advantage of that by applying to a lot of cards very quickly. As you apply for your tenth card in the day, they won’t know that they’re the tenth card because the first nine haven’t yet reported your activity.

  8. j says:

    Awesome article. Law people: The cites for the Smiley (#43) and the Marquette Bank (#45) cases are, respectively, 517 U.S. 735, and 439 U.S. 299. Smiley’s an especially elegant little piece of Scalia-jurisprudence.

  9. subcorpus says:

    hello …
    very informative article …
    an interesting read …
    thanks …

  10. crazyj says:

    I’m interested in hearing more about #40. Where is the citation for that one? Also, does it only apply to chargebacks for “unsatisfactory goods or services” and not for non-delivered purchases?

  11. rick says:

    #51: closing a credit card account will negatively affect your credit. i didn’t know this and just found out the other night on a news magazine digest on tv.

  12. Heinz says:

    I seem to remember a card issued by Citibank, probably back in the 70′s. It was called the Everything Card and, I believe, had the Visa color scheme. Is my memory correct?

  13. jim says:

    Heinz: Turns out Citibank’s first card was released in 1967 and it was called the “First National City Charge Service,” commonly known as the Everything card. (citigroup history website)

  14. CardGuy says:

    #29 – Expiry Dates are “fake”.
    They’re not. Expiry Dates are only “fake” if you expected the card to melt away, or explode like a self-destruct spy message.

    The expiry date is one of many controls used in the authentication process. All credit card computer systems evaluate the account number, expiry date before completing an authorization. In the case of a freshly reissued card, some systems allow a transition period where both the old card & the newly issued card (most often with a new expiry date) are permitted to be used. Most card companies systems decline purchase attempts on the old card after the new card has been used.

  15. Robert says:

    Seems like Home Depot is always asking me for my driver’s license when paying with a CC – they got a special agreement with the CC companies?

  16. tim g says:

    Fascinating stuff…thanks!

  17. beanspants1 says:

    RE: #34:
    You need to do a better job of explaining the math, or validate that it is true.
    I come out with 97 on a jp morgan chase commerical card and a 96 on my discover card by doubling and adding up all the digits.

    oh yeah, market cap is simply all the shares traded by share price, so it’s not particulary indicative of anything, and really not useful for comparisons. yearly revenues tells which one is the biggest and most powerful.

  18. moneymonk says:

    Wow , you really took time out to explain all of this.

    I like your title: Department of Holy Crap They Make A Ton of $$$$$

  19. Independent George says:

    I love #7.

    Visa actually stands Visa International Service Association.

    I wonder if they were the client for Dilbert’s TTP Project.

  20. GreenEgg says:

    Some oopsies:
    #29 – The expiration date date is used by the issuing institution. It occurs in the “discretionary data” part of your card number (the track 2 data).
    #36 – The first 6-10 digits are your BIN number (issuer ID).

    A note:
    If you have a debit card with a credit logo, make sure you request “pinned debit” when you use it. A credit transaction bills your bank and the merchant for the pleasure of doing business. A debit transaction bills your bank and passes some of that money down to the merchant.

  21. Willy Chin says:

    What of the name Chargex for Visa? Was that just in Canada?

  22. jim says:

    Willy: From the looks of it, Chargex eventually became VISA; Chargex is also a strictly Canadian thing (a product of the Royal Bank) – we never had it here in the US.

  23. DancingFool says:

    For those of you visiting other countries, note that some of these facts are different. For example, in Australia #16 is wrong. Shops are specifically permitted to charge extra for using a card (why not, it costs them extra). Not all do, but they are allowed to.

  24. I'm Bored says:

    >

    0.33% is 1/3 of one percent. 0.0033 is thirty-three ten thousands of 100 percent. Thirty-three ten thousands of 1% would be 0.0033 x 0.01 = 0.000033.

    100% = 1
    1% = 1/100

  25. Debt or Alive says:

    Rick, how bad does cancelling a credit card hurt your credit score? We just paid off one with interest rates in the 30′s and cancelled it. Should we have held onto it, and by not doing so, how much did we screw ourselves?


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