For many people who own a credit card, receiving your statement can sometimes be the opposite of fun. But, these plastic cards have a long history and have evolved exceptionally over time.
Here are ten interesting facts about credit cards you probably didn’t know that might change your perception of them!
Fact 1 – Credit cards were designed as loyalty cards
Initially, credit cards were created to be very similar to the modern loyalty card. The concept was introduced for the very first time in the 1950s by The Diner’s Club and was eligible to be used at 27 different restaurants in New York City. The Diner’s Club had a resounding 1.3 million cardholders by the mid-1960s.
Fact 2 – VISA stands for Visa International Service Association
The VISA card was first founded by the Bank of America, and the logo colours of blue and gold symbolise the sky and iconic hills of California. It was first introduced in 1958 as BankAmericard and later became VISA in 1976.
Fact 3 – The first cardless transaction occurred at a petrol station
In 1997, Mobil, a petrol company, introduced a system called Speedpass, which enabled customers to carry out quick and contactless payments at Mobil petrol stations.
Fact 4 – Credit cards are one of the most popular payment options in Australia
There are over 19 million credit cards in Australia in 2020, which nets to approximately $29.5 billion accruing interest. There is almost one credit card for every adult Australian, according to the RBA!
Fact 5 – Physical credit cards are the same size all over the world
One of the reasons why credit cards are so popular is because they can be used globally, as they have a universal sizing which has been governed by the ISO 7810 international standard.
Fact 6 – Credit card numbers can be validated via a checksum formula
To check if a credit card is valid or not, you can use the Luhn algorithm that uses the checksum formula. Starting from the right, you need to double every second digit. For example, if the number is 1111, it would become 2121. Then, you need to add all of the resulting digits. If the sum of the digits is divisible by 10, then the credit number is valid. If not, it’s an invalid credit card number. By using this algorithm, merchants can verify the validity of a card number before accepting the customer's payment, which helps them avoid credit card fraud.
Fact 7 – All credit card issuers are required to provide a credit card key factsheet
When you apply for a credit card, the lender should give you a ‘key factsheet’ to answer the following questions:
- How will the minimum repayment be calculated?
- Is the interest rate applicable for both purchases and cash advances?
- What is the interest rate that is applied to bank transfers?
- What is the promotion rate, if applicable?
- What is the length of the interest-free period, if applicable?
- What are the annual and late fees, if applicable?
It might be helpful to carefully read these key facts about the credit card while comparing your options to find the right credit card for you.
Fact 8 – If you pay more than your minimum repayment, you can limit your interest charges
If you only pay the minimum amount due for your credit card each month, it will take you longer to pay off the balance. This usually results in you paying more interest. Instead of paying just the minimum amount, try paying however much extra you can afford. Your monthly credit card statement must tell you how long it will take you to pay off your entire balance by only making minimum monthly repayments. Use this information while determining the amount you choose to pay every month.
Fact 9 – You can modify your credit card options online
Gone are the days where you need to rush to your lender’s office to cancel your card or change your credit limit. If you’ve used your credit card after 1st January 2019, your credit card provider must give you the option to cancel your card and even increase or decrease your limit online.
Fact 10 – Interest rates differ from lender to lender
The interest rate charged to every payment you make using your credit card is different from one lender to another. And, the interest rate charged plays a huge role in the amount you need to repay after making a purchase. At the time of writing, the average credit card standard interest rate is 19.77 per cent; however, the average low-interest credit card rate is 13.03 per cent as per the RBA.
It's recommended to browse through various credit card providers before choosing a credit card that suits your needs and provides the best repayment options.