Text 3 Credit Cards

The first credit card was made in 1950. It was the Diners Club card, and it could only be used in 200 restaurants in New York. Today, most shops, hotels, restaurants in the world take credit cards, so people do not have to carry a lot of coins and notes with them when they travel.

Credit cards are a convenient means of making purchases. Credit cards are not really money, but rather a means of obtaining a short-term loan from the commercial bank or other financial institution that has issued the card.

Almost every financial institution issues credit cards – Visa, MasterCard, Diner’s Club, American Express, or Discover. These cards allow small companies to offer credit without putting a burden on their cash flows because they receive almost immediately credit for credit cards purchases.

When you purchase, say, a box of cassettes with a credit card, the issuing bank will reimburse the store. Then later you reimburse the bank. You will pay an annual fee for the services provided and, if you choose to repay the bank in installments, you will pay a sizable interest charge. Credit cards, in short, are a means of deferring or postponing payment for a short period of time. Your purchase of cassettes is not actually complete until you have paid your credit-card bill.

It is worth noting, however, that credit cards – and, indeed, all other forms of credit – allow individuals and businesses to “economize” in the use of money. Credit cards permit you to have less currency and checkable deposits on hand to negotiate transactions. Stated differently, credit cards facilitate the synchronization of your expenditures and your receipt of income, thereby reducing the cash and checkable deposits you must hold.

Text 4 Traveller’s Cheques

When travelling abroad, it is always wise to carry your money in traveller’s cheques because cheques are protected against loss or theft. If your cheques are lost or stolen, the issuing authority will refund your money.

Not only are they safe, they are also convenient. They are available in different denominations and different currencies and they can be cashed at most banks throughout the world. Most shops, hotels and restaurants also accept them.

To obtain traveller’s cheques you usually go to your bank. They can be paid for in cash or debited to your account. Large amounts, however, must be ordered in advance.

For the safety and convenience of traveller’s cheques you are charged two commissions: an insurance commission (usually1%) when you buy them and an encashment when you cash them. They are very easy to use. When you collect them, you sign each cheque once. The cashier may enter the amount in your passport. When you cash them, you sign each cheque again. The cashier will usually ask to see your passport again too.

It is advisable to make a note of the serial number and denomination of your cheques in case they are lost or stolen. Keep this separate from cheques.

The inconvenience of traveller’s cheques (checks) in the USA is that they should be in dollars as the US banks usually do not deal with foreign currency. Traveller’s cheques can be bought at most banks but the service charge may vary. One can use traveller’s cheques almost everywhere: in hotels, stores, or restaurants.