Plastic Money
Today the purchasing of goods and services is fueled by the ready
availability of plastic money. Recent statistics revealed that
in September 1998, "Americans had $2.03 trillion in unused credit-card
capacity, up more than 700 percent from $287 billion in 1988" and "there
was $459 billion in credit-card debt outstanding."
Plastic money is available in four basic forms: charge cards,
credit cards, debit cards and smart cards.
Charge Cards must be paid every thirty days. This type
of credit is one of the oldest forms. Actually the roots go back
to the general store days when townspeople would maintain a charge
or tab until their crops of livestock were sold at the season end.
Department stores adapted this concept to make their products available
to customers and ease seasonal inventory levels. Some national
credit cards, such as American Express, started this way but have
also entered the more profitable credit card market.
Credit Cards operate on a credit limit and revolving basis.
The consumer can continue to add to their balance as long as they
make monthly minimum payments and do not exceed their credit limit.
If timely minimum payments are not made within a present grace
period then interest rates may be increased and late charges added
to the balance. Over limit fees can be added, if the balance exceeds
the credit limit. Credit cards, as well as charge cards, are the
property of the issuing institution. If cardholder does not comply
with the terms of the credit card agreement, the account may be
closed by the institution and the balance demanded in full.
Debit Cards allow consumers access to their bank account
by using an automated teller machine (ATM) or point of sale (POS)
terminal in many local merchants. The transaction results in a
debit (deduction) in the individual's checking account.
Smart Cards store personal, medical and financial information
within a computer chip implanted in the card. The financial information
may contain a section that will hold a certain dollar value that
can be reduced by use, like a debit or charge card, in POS or ATM
machines. The ATM can recharge the dollar amount available as the
account balance increases.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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