In prehistoric times, man built tools from stone in a time we cunningly refer to as the Stone Age.  As time progressed, man started using bronze and eventually iron to shape the world around in, bringing about the Bronze and Iron Ages respectively.  Nowadays, many consider that we are living in the Plastic Age due to the abundance of uses for the oil-based material that we see all around us; on this desk alone the telephone, stapler, calculator, laptop and power-pack are all made, in part, from plastic!  However, as accurate a term as Plastic Age may be, I do wonder if we have misjudged just which kind of plastic is responsible for the world in which we currently find ourselves…  I wonder if the Plastic Age wouldn’t be more aptly named the Credit Age…

For it is true that we have built our new world on plastic; the plastic in our wallets that has allowed us to live outside of our means for so long that we have come to take our country’s incredible economic growth for granted.  It is this credit that has allowed us to build our lives; by all buying things that we can’t afford, we have created a land in which everybody has a lot of things, but still has no money.  Of course the economy is going to boom for a bit in such a situation; when everybody goes around buying things all the time, the economy grows – simply put.  Normally this is a sign of a prosperous nation and is something to be pleased by, but in the case of our latest boom, it is essentially down to the fact that we have been pretending that we are all very wealthy for so long that we have forgotten that, in actual fact, we are not.

But maybe the Plastic Age is a more suitable name after all; maybe it actually embraces the way in which we put things “on plastic” as a way of forgetting that we actually cannot afford them.  By calling this age Plastic, perhaps we are paying homage to the deceptive credit-based plastic that we have used to build the oil-based plastic word that we live in…

Last time we discovered that banks are cutting back on the amount of credit cards they issue and who they issue them to.  We also found out that consumers, especially in the USA, are using their credit cards more for small transactions, but less overall.  This seemed like a good move; small purchases are easier to repay on time and help cut down on the amount of interest and debt that consumers accumulate, allowing them to rebuild shattered credit ratings and continue to use their cards within their means.  However, is this enough to save the credit card industry?

With banks holding back credit and consumers starting to live more within their means, I wonder whether we could already have lived through the Credit Age?  Certainly the economic recession is terrifying to many of us, but I wonder whether this fear won’t just fade away when the dawning light of financial stability reappears – however many years in the future that may be.  For we should not underestimate just how great a change it would be for us to move away from living outside of our means.  The commonplace use of credit cards is not simply something that could disappear overnight; it is a lifestyle for so many that credit card spending is practically part of our cultural identity!  Should we expect this depression to teach us a hard lesson from which we will learn and grow, or should we be realistic and assume that the financial crisis will simply lead to a new system of credit into which we will all gratefully plunge ourselves?

We cannot deny the fact that most of us would rather live outside of our means and pretend that everything is fine when it really isn’t.  Our history of irresponsible borrowing and masses of ever-growing debts are tribute to these facts.  Perhaps the credit crunch will teach us a valuable lesson; maybe it is time for us to put our credit cards down after all…

As this blog has mentioned, credit cards have been around since . and have become a very large part of our lives.  However, the next two posts question whether we may have been witness to the peak of the credit card industry…

As the financial crisis worsens, anybody within the credit industry could be forgiven for pondering the future of credit cards.  Although we have come to take credit for granted, could the increased paranoia about lending and spending mean that banks have to reconsider just how many credit cards they are willing to provide to money-strapped public?  They are already raising interest rates and imposing strict rules on just who can and cannot get which kinds of credit cards, yet many think this is just the very start of the financial crisis!  Who knows what the overall impact on credit cards will be by the time things start to brighten up.

It’s not just the banks that may cut back on credit cards either; we, the people, may very well start leaving our credit cards at home as the financial situation worsens.  After all, the economic depression was caused by our reckless spending and has already consumed many a job, retirement plan and house; it should be obvious why even the most addicted credit consumer might start thinking twice about reaching for their plastic in times of need.  In fact, bank executives in America have confirmed a change in spending behaviour, claiming that more customers have started using their credit cards for small purchases like food and fuel, whilst holding back from purchasing expensive items altogether – this seems like a step in the “right” direction, doesn’t it? 

Chip and PIN is something we have all heard of, but I wonder how many of us really know what it is, how it works and why it is meant to be better than the old method of signing for your purchases.  For your convenience, I shall outline the subject now:
Chip and PIN is the implementation of the EMV (Europay, Mastercard and Visa) standard for secure payments, designed to make transactions more secure and reduce credit card fraud.  It involves embedding tiny microchips into credit and debits cards, which are automatically authentically using a PIN security number.  By inserting the card into a credit card terminal, a customer has to insert the correct PIN number to authenticate the payment.  If a customer does not know their PIN number, the verification fails and the transaction does not go ahead; making the system secure, yet also very swift and simple.
Until it was introduced, all credit and debit card transactions required a signature for verification after the account data was read off the magnetic strip or an imprint was made of the raised text of the card.  The problem with this system was that people could easily steal cards from people and forge a signature, or steal cards from the post, write their own signature on the card and go about using it as if it was their own.  More advanced methods of card fraud involved technology that was used to clone cards by reading the magnetic data from one magnetic slip and writing it to another.  With the new system, another person may have your card but, without also knowing the correct PIN number, they cannot use it for face-to-face sales.  At the same time, these PIN numbers are entered in very public spaces, where somebody could easily observe and remember them.  All it would then take would be for the same person to steal the relevant card and cashiers have no reason to suspect them for using it.  Even so, it would seem harder for another person to get hold of both your card and secret PIN number than to steal your card and forge your signature.
Despite the growing popularity of the Chip and PIN system – over 1.1 million machines in the UK are Chip and PIN compatible – many small businesses are reluctant to upgrade, due to the cost of purchasing a new credit card terminal, or point of sale system.  Nevertheless, all major banks now issue cards featuring both magnetic strips and chips.  Cashiers can still instigation PIN Bypasses, allowing customers to sign for their purchases if they forget their PIN number, however this is strongly discouraged and card issuers and banks can choose to decline transactions that are made in this way.

Credit cards have taken a lot of indirect flak in recently months, mainly due to the turmoil in the world of finance that is blamed largely on irresponsible spending and lending, helped – in part – by our use of credit cards.

However, it should not be forgotten that it was not the use of credit cards that got us into trouble, but the irresponsible use; like so many things in the world, credit cards are great when used sensibly and with some foresight. In this post I will outline some advantages to using credit cards within merchant services, with regards to the protection they offer the comsumer.

When you make a purchase on a credit card you are essentially letting the credit card provider pay for the purchase and agreeing to pay them back within a a grace period. This method of delaying payment acts as a protective buffer against fraud, dodgy dealings and good old fashioned incompetence. Because it is the credit card provider that has made the payment, you have invested nothing until you make the repayment - giving you time to ensure that the product arrives if it is being sent, that you have not been charged twice or been otherwise messed around. If it turns out that something has gone wrong, you are actually under no obligation to pay the credit card fee until the issue has been resolved. In fact, you have the right to refuse to pay and leave it up to the credit card provider to claim their money back and, let’s be honest, merchants are more likely to bend over backwards for Visa than they are to appease you!

To give you a personal example; my band and I spent two months in California this summer and purchased our plane tickets online with debit card. Just before we were due to return home we got the news that Fly Zoom had gone bankrupt and taken our tickets with it! Had we paid on credit card, we would have been entitled to a refund; as it was we were forced to accept the loss of hundreds of pounds-worth of tickets and buy new tickets home from Virgin! In cases like this, there is no substitute for the protection offered by credit cards!

It’s not just when the merchant goes wrong that you are protected with a credit card either; in the cases of loss, for example, purchases made on a credit card can be replaced, repaired or even fully refunded, usually within 90 days of purchase. Naturally this does not cover the simple misplacing of an item, but loss through fire, floods, theft and so on – the specifics are variable. Nevertheless, free insurance for a few months is definitely not to be sniffed at! What’s more, you can actually register your purchases with the warranty management service and get an extra year of warranty protection on your purchases as well!

The key to getting the most out of the protection offered by your credit card provider is knowing the services on offer as well as your own rights. The delayed payment offers a means by which you can argue your case without having your money taken from you.

In the next post I shall cover other advatanges of using credit cards - namely the massive convenience!

Credit card fees are similar to the statues involved in Mount Rushmore; most people know they exist but not so many understand the details – who are the people involved, exactly how large are they and, more importantly, just why?!

Well, here are some answers for you.  The people that benefit most from credit card fees are the credit card issuers themselves; each business that accepts credit cards as a form of payment pays a fee and, of this fee, approximately 85% goes to the issuing bank!  The rest of the money goes mainly to the credit card processor – which is normally Visa or MasterCard since they own 75% of the market!

75%!

Considering that almost every merchant service – and certainly every big business – accepts payment in the form of credit or debit card, it doesn’t take the financial genius of Michael Martin to realise that there is lot of money to be made on these credit card fees, rightly or wrongly.  After all, what is it that these companies are actually doing for their money?

Well for starters, using a credit card is meant to help protect you from fraud, entitles you to refunds and includes other protective methods.  Furthermore, they provide customer service and, of course, pay for everything you buy before the money is taken from your account.  The biggest expenditure, however, is the rewards schemes that credit cards offer; around 40% of all fees generated by credit card issuers are the direct product of the rewards schemes that they use to lure people in to start with!  Examples of these rewards include air miles, free balance transfers and reward points that can be collected and spent on a variety of lovely things, like money-off car insurance!

So, despite the fact that only Marvin the Paranoid Android has a chance at understanding the “complimentary” monthly statements and transaction reports; all these things have to be paid for – and apparently Visa needs to make an average of $0.07 for every transaction made in the world in order to provide this service…  After all, their quarterly net income in April was a mere $536 million!  As for the credit card providers and banks; how else can they afford to give out so many generous bonuses without charging everybody else for it?

In conclusion, despite the fact that credit cards are almost a necessity in modern life, the ridiculous fees that we end up paying are essentially there to make more money for the people that pressure you into needing them in the first place.  But that’s the way of the world eh?

Oh and finally; Mount Rushmore National was created by Gutzon Borglum, and comprises of 4, 18-metre high heads of George Washington , Thomas Jefferson, Theodore Roosevelt and Abraham Lincoln.  Apparently the entire memorial covers 5.17 km2!  It was created as a memorial because 150 years is quite a lot of history in the States!

It

Before diving into our first post, allow me to welcome you to the Seymour Direct Blog. For our first post I considered it appropriate to take a look back at the history of plastic cards. By taking a look back to the past I hope that we can understand how we have arrived at where we are today and, as a result, be in a position to look at how we use our cards today, both from the perspective of individuals and businesses.

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