BRITISH CREDIT CARD SYSTEM

The British credit card system developed largely in the wake of the American credit card system. Credit cards began in the United States with the issuance of department store and gasoline cards. What is known as the credit card industry, however, really began to develop with the introduction of travel and entertainment cards Diners Club, American Express, and Carte Blanche in the late-1940s and early-1950s. American travel and entertainment cards were introduced into Britain in the 1950s.

General purpose credit cards, the backbone of the credit card industry, were introduced in the United States in the early-1960s. General purpose credit cards are those which, as their name implies, may be used to pay for a wide variety of goods and services in a wide variety of establishments. A major difference between general purpose credit cards and travel and entertainment cards is the revolving credit feature of the general purpose cards. The revolving credit characteristic means that general purpose credit cards are truly credit cards, as are department store credit cards, as opposed to travel and entertainment cards and most gasoline credit cards, which are, for the most part, bill-paying conveniences. Travel and entertainment cards provide nominal 30-day credit, although dates of purchase and billing and payment cycles both narrow and stretch the nominal period.

General purpose credit cards were initially issued by commercial

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es, they are restrained by a fear of losing major segments of their card bases. When Lloyd's Bank impose an annual fee, it lost 20 percent of its cardholders. Regulation The Truth in Lending Act of 1968, among other things, denied credit card issuers the right to prohibit retailers from imposing surcharges on credit card purchases in the United States. Many retailers impose such fees to offset the fees they are required to pay to the credit card issuers. A similar law does not now exist in Britain. There is, however, strong public pressure for such a law, although, predictably, the credit card issuers oppose such action. Pressures also exist in Britain for a law establishing limits on interest rates that may be charged on credit card balances. Similar pressures also exist in the United States. Banks in both Britain and the United States impose such laws. In Britain, however, the return on capital in the credit card industry exceeds 40 percent. In the United States, commercial banks earn "more than three times the profitability of business loans" on credit card accounts. There is little doubt why bankers oppose laws limiting interest rates on credit card balances. Consumer Market "Offer banknotes for a washing-m

Category: Business - B