9 Bizarre Credit Card Facts Most People Aren’t Aware Of
Do you own a credit card? If you do, you probably think you know everything about its features, benefits, and drawbacks. From interest rates and terms to discounts and other perks, we think there’s nothing that can surprise us.
Even if you’ve been using credit cards for years, there are several uncommon details you have most likely missed since creditors often change their policies depending on internal and external (socio-economic) factors.
In this post, we’ll share 9 bizarre credit card facts most people are unaware of. So, if you have a few minutes to spare, keep reading to learn something new about the piece of plastic you use to pay your bills and pay for your purchases.
9 Weird Credit Card Facts You Should Know About
1. Credit Cards Were Issued Based On Looks and Appearances, Not Finances
Assessing eligibility and establishing credit scores are based on our finances. However, did you know this wasn’t the case a few decades ago? In the past, credit was issued based on the applicant’s appearance and social standing.
Credit bureaus considered several factors, including the applicant’s nationality, area of residence, and even attire. Those that didn’t qualify as members of “upstanding citizenry” in their books had their credit card and mortgage applications rejected. Moreover, since the credit system wasn’t digitalized back then, applicants had to move to other towns and cities following rejection.
However, as western society evolved over the years, a law was passed to legally mandate creditors to evaluate eligibility and scores based on the applicant’s finances and how well they manage their money.
2. Credit Cards Expire Due to Wear Out, Not Security Reasons
Looking closely at your credit card, you will find the expiration date mentioned. After this date, users are required to get a new card. Most people believe this limited shelf life is due to security reasons or a clever way to charge users money for new cards.
However, the main reason for this is your card’s magnetic strip. Whether it’s frequent swiping, handling, or other forms of wear out, these strips can incur damage that affects their ability to function properly. As a result, you get a new one every two to three years since that’s how these strips typically last.
3. Interest Rates Can Fluctuate
If you’re new to the world of credit, this fun fact isn’t always fun, especially if it affects you negatively. Most people who sign up for credit cards with low APRs think they scored seized a lucrative opportunity. However, little do they know that many creditors use this as a marketing trick to bait customers into opting for their cards.
As per the law, they can raise interest rates as high as they like. Moreover, the top banks in the US are federally chartered. They don’t have to adhere to state or local laws that keep interest rates in check.
Moreover, card issuers can also change the interest rate calculation in their favor and send a 35-day advance notice to users following the update. The good news, however, is that users can say no to interest change, as per the CARD Act.
Sometimes, companies will offer you a better deal if you show them signs you’re willing to cancel the card and look for other options. However, they could have new terms, such as higher minimum usage or longer loan tenures.
Either way, ensure you get the new deal in writing so you’re legally secure. Furthermore, many creditors use interest to change to downsize their client base and get rid of users with poor scores. So, don’t be too shocked if they decide to cancel your card if you disagree with the new interest rate.
4. Credit Cards? More Like Credit Coins and Plates
Here’s another bizarre credit card fact that would shock you. Credit cards weren’t always made of plastic. In fact, it wasn’t until 1959 that banks and creditors started issuing these new variants. You’re probably wondering how credit was issued, then.
To understand this, you first need to dive into the brief history of credit. Most people are unaware that the concept of credit has been around since the 18th century. Back then, charge coins were used for this purpose. These coins had specific numbers corresponding to the user’s spending record kept by issuers.
After the month’s end, the user would receive a bill for their expenses, just like today. As the number of users grew, charge coins became difficult to manage. As a result, charga-plates became a more suitable replacement. These plates were smaller and were only given to elite citizens.
5. One Card, One Store
To simplify card management, most creditors in the 19th century offered cards that would only work in a specific store or chain. It wasn’t until the inception of the Visa card that creditors enabled shopping from multiple stores.
This move also limited the number of charga-plates per user as the demand for credit-based shopping grew exponentially during the third industrial revolution.
6. Businesses are Also Given Credit Scores
Business credit cards became wildly popular in the late 70s are more companies accumulated debt to buy equipment, pay rent, and carry out other business-related purchases easily. Most people don’t know that businesses are also scored according to their spending behavior, just like normal consumers.
Since businesses are considered high-risk due to greater chances of defaults, they often have to pay more interest on loans.
7. Canceling Your Card Reduces Your Credit Score
Canceling is a common practice in the credit industry. Millions of users cancel their cards every year for different reasons. Some find better offers from competitors, while others retire with all their debts paid off. Regardless of your reasons, canceling your credit card is a bad idea, especially if you need to get one in the future.
By doing so, you’re essentially wiping off all your usage history, which could harm your overall score if you use multiple cards. When your score goes down, your remaining card issuers could increase your APR and interest rates while reducing other benefits, such as discounts in specific stores and purchase protection.
8. Invitation-Only Credit Cards Exists
Super-rich people like to show they’re rich in different ways. Some buy expensive cars and huge mansions. Some spend thousands of dollars in exclusive eateries and even more on vacations or business trips year-round.
Since their lifestyles are different from the average citizen’s, so are their financial instruments. For instance, invitation-only credit cards are becoming quite popular among the elite. Most of these cards have limits of up to $250,000 a year and are only given to people with a minimum annual income of $1 million. Some have no spending limit.
Popular cards include the American Express Black Card, the J.P Morgan Chase Palladium Visa card, and the Centurian credit card. These cards are physically stunning and often made out of high-end material, such as gold or silver.
9. MasterCard and Visa Card Users Don’t Need to Show ID
You might have been asked to present your ID to prove ownership. If you look at the fine print, you’d learn you’re well within your rights to turn down this request as MasterCard and Visa cardholders don’t have to show anyone their ID when making payments.
So, the next time a merchant asks you to show your ID, let them know that you’re aware of your legal rights and that they can’t use their identification as a condition of acceptance. However, you need to ensure the back of your card is signed. Otherwise, merchants have no choice but to confirm ownership as part of due diligence.
Wrapping Up
As you can see, there’s much more to your credit card than meets the eye. So, before you opt for a new one or use your existing one again, check its terms and conditions. Although some of our bizarre credit card facts are historical, they can help you understand why certain things are the way they are.
As always, we recommend our readers adhere to the best practices when using their credit cards to maintain a healthy report. You can also hire a financial expert or advisor to help you manage your finances smartly.
