Did You Know About Any Of These Credit Card Facts?
Credit cards have basically taken over our lives. They are everywhere, they’re here to stay and it’s almost as if they’ve taken over every corner of our lives. And I’m not saying that to sound hyperbolic.
Take 2012, for example, when two-thirds of personal sales were made with credit cards. That sum came up to $2.48 trillion. On the other hand, only 27% of transactions were made in cash. If anything, this is proof enough that the plastic is definitely not a fad, but more on that later!
Here are 20 surprising facts about credit cards, from their inception to exactly how much they impact our daily lives, as well as a bit of trivia sprinkled in between.
1. Thank the Farmers
If you’re heavily dependent on your credit card and can’t imagine what it’s like without it, you have the farming communities of the late 19th century to thank. If it weren’t for them and ingenious store managers, the world would have probably needed a little while longer to come up with the idea.
It’s a story about needs and… seasons. Yes, you read that right. Basically, because of their fluctuating income due to the nature of their work, farmers couldn’t carry out consistent purchases. Store managers, understanding their plight, took records of their transactions in ledgers and allowed them to pay when they were able to. The practice became so popular that eventually, stores couldn’t keep up, so they issued cardboard credit cards in order to link the farmers with their ‘accounts’ faster.
2. Do the Numbers Mean Anything?
Yes, yes they do. The first ones in particular pinpoint which industry issued the card. There are some exceptions. For example the numbers 4 and 5, which both represent banking institutions. The only difference is that your card starts with a 4 if it’s a Visa and with 5 if it’s a Mastercard. Here’s a list:
- 1 for airlines
- 2 for travel and entertainment
- 3 for American Express and Diners Club
- 4 Visa
- 5 Mastercard
- 6 for merchandising and banking
- 7 for gas cards
- 8 for telecommunications
- 9 for national assignments
Wondering about that Diners Club? Keep reading, we’ve got an interesting fact waiting for you later on!
3. You Don’t Need a Machine to Validate a Credit Card
It’s a cool little party trick but sadly, it won’t protect anyone from criminal attacks. At most, using this relatively simple method could only shield against accidental errors. But try it out anyway and marvel at its cleverness!
It’s called a Luth algorithm. You have to start from the right by doubling every other digit. Next, you have to add them to the numbers you didn’t double. But wait! If you have any double-digit numbers, like 13, you have to sum those digits up first. We know, it sounds a little bit confusing but we promise it’s really easy to do once you get the hang out of it.
Once you’ve added everything up, if the total sum can be divided by 10, congrats, your credit card is valid. But you already knew that, of course.
4. Standard Credit Card Interest Rates Are Illegal in a Lot of States
Did you know that there is a limit to interest rates? And did you know the limit is different from one state to another? In Alabama it is 6%, in California it is 7%, and in New York it is 16% all thanks to state usury laws.
These same laws, however, don’t apply to national banks.
Speaking of usury laws, they’re the reason behind credit card companies charging interest rates based on where their headquarters are located, not based on where borrowers live. That’s why you’ll find Capital One in Virginia or Bank of America, HSBC and Morgan Stanely in Delaware, states in which there is no cap. Citibank chose to move to South Dakota, where the interest rate cap is 36%.
That’s why you probably won’t hear about headquarters moving to Alabama or California, as per our previous fun fact.
6. Credit Card Junk Mail
Yes, it is illegal to send unsolicited credit cards through the mail. Back in 1958, however, things were a little different. So different in fact, that the first general-purpose credit cards were sent out as junk mail by a Bank of America employee. 60,000 paper cards with preapproved credit limits of $300 were sent to the citizens of Fresno, California. In 1959, that number reached 2 million!
All in all, Bank of America suffered a loss of $8.8 million because of this brilliant idea. Unsurprisingly, the employee also lost something- his job.
7. A Whole Lot of Credit Card Fraud
Credit card fraud is incredibly prevalent in the US. Data from back in 2013 showed that credit card fraud represented 40% of overall losses. If you want to learn some of the details, just ask one of the 12.6 million victims from 2012! Wondering just how much money that accounts for? Oh, just a measly $21 billion.
8. Buying You Costs $80
Those $80 are spent on marketing and administrative fees. On average, credit card companies expect to gain $120 per customer per year. That’s just a little bit more than their initial investment.
9. Household Dependency on Credit Cards
A lot of people are very conscious about when and how they use their credit cards and you may very well be one of them. But another study in 2012 showed that 40% of households depend on them for basic living expenses.
If you’re not part of this group can you imagine paying your mortgage, utilities, and insurance with your credit card on a monthly basis? What about groceries? This isn’t about America’s obsession with the program, it’s about not having enough cash to survive otherwise.
10. Diners’ Club Card Was the First Modern-Day Credit Card
It was invented by Frank McNamara in 1950 and could only be used in New York in a handful of restaurants and two hotels. It quickly became a status symbol and so gained 10,000 members in the first year alone, mostly elite businesspeople. Quite a stretch from farmers, right?
The story behind the credit card is a bit of a silly one. McNamara was dining at a popular New York restaurant when he realized he’d forgotten his wallet at home. Not something a businessman would normally do, mind you, but it just so happened that he had changed suits before dinner and grabbing the wallet had just slipped his mind.
Considering how prevalent credit cards are nowadays, it’s surprising to think of their inception as something so trivial. What’s even stranger is the fact that the story doesn’t even make sense. McNamara thought having a card to pay for services instead of cash was all well and good, but he still would have forgotten it in his other suit back at home anyway!
11. “This Is Just a Fad”
McNamara had a brilliant idea but he didn’t necessarily believe in it. In fact, he thought it was just a fad, so he sold his shares for $200.000. Today, that would have meant $1.6 million. Talk about a bad idea! Not to mention that Diner’s club was accepted through the world by 1960. It’s a little disheartening that the creator didn’t see what millions of users did.
12. Credit Cards Don’t Actually Have an Expiration Date
The numbers on the card serve two purposes. Firstly, for online or phone purchases. You’re required to give those numbers as proof of ownership and that you have the card on you. This is obviously because vendors can’t see it. Secondly, it gives issuers a date for when to release a new card.
13. Maximum Liability Is $50
Per card, that is. Still, it’s quite a small amount of money considering how much thieves could steal from your account. If, after you’ve reported your card stolen or lost, transactions are still being made, you don’t even own anything. That’s all thanks to the Fair Credit Billing Act, by the way.
14. You Can Decline Increased Interest Rates
How many of you are feeling sudden rage right now? If you say no to increased credit rates several things might happen. Providers can up your monthly minimum payments or lower your line of credit. They can even cancel your card, but you’ll get at least 5 years to pay it off. You can even try to convince them to keep your current rates. Whatever happens, make sure you get the agreement in writing!
There are more cards in the world than you can imagine
Visa, Mastercard, and American Express combined have 1,635 million cards in circulation. That’s probably a difficult number to envision, so we’ll give you a hand. If you lay all of them side by side you can circumvent the Earth over 3,5 times. How? Because all of them will span 86,981 miles.
15. Larget Private Antitrust Settlement
That’s right, the largest private antitrust settlement was over credit card fees and it came up to $5.7 billion. Want to know what the funniest part about this fact is? The second-largest private antitrust settlement was also over credit card fees. The second time around the sum was only $3.7 billion (if one can use ‘only’ when talking about such gargantuan amounts of money).
Considering the fact that you probably use your credit card almost daily, here’s a nifty pouch to keep it safe! Do you know any trivia surrounding credit cards? Comment and let us know!
Be sure to stay informed! We think you’ll love this read: 29 Money Saving Secrets Only Walmart Employees Know