Hi, this is Mr Credit Card from www.askmrcreditcard.com. Today, I am going to write about credit card industry practices in different countries and how credit card companies respond to the different international environment. If you are looking to apply for credit card, please check out the section where I recommend the best credit cards.
Firstly, I would like to wish everyone a very Happy Holidays. While I write about credit cards on my blog, the focus is primarily based on US. But I also realize that not everybody is from the US and that different countries have different regulations and industry practices. In this post, I would like to explain how the credit system works in the US and how it differs from other countries. I will also look at how different credit card companies market differently in different countries.
US Credit Card Industry – In the US, an individual’s credit score is extremely important. When one is looking to apply for credit, credit card issuers look at one’s credit score to determine if they will grant that individual credit or not. But for individuals in the US, developing a credit history is a chicken and an egg story. You need a history to apply for credit, and yet financial institutions look at one’s credit history!
Folks in the US have a couple of ways to get around this. Firstly, those who are in college can apply for a student credit card. That is the only time when you have no credit history and get a credit card with no annual fee! Next year, after the CARD Act, students need to get a co-signer or give proof of income.
You do not exactly have to get a credit card to build a credit history. If you have no credit history and take a mortgage, the mortgage banker will request your W2 income statement and probably a list of your liquid assets. You can still get credit, but probably at a slightly higher rate than if you had an excellent credit score.
An individual’s credit history is also important if one wants to get a business credit card. Without a good credit history, you simply cannot get one for your business!
The main flaw in the US credit scoring system is that they do not consider income or your assets as a factor. Hence, even if you have no job, you can technically still get a credit card!
Europe – In the UK, they have a similar model in that there are credit bureaus that record individuals’ credit score (like Experian!). However, in the rest of Europe, credit cards are not as popular and credit bureaus are almost non-existent (check out this post about the French system).
Asia – I’ve been to a few Asian countries and have many friends there. Almost all said that concept of a credit bureau was unheard of! Banks have their own criteria on giving their customers credit. Income is almost always an important factor. Very often, proof of income is very important.
Global Credit Card Issuers
Citi and Amex have their bread and butter cards everywhere – In the US, Citibank, Bank of America, Chase, American Express and Capital One are the main credit card issuers. In the international markets, only Citicards and Amex are really present overseas. For example, I did some research and found that Citi and American Express are present in more countries than any of the other US based issuers. For example, I checked out Citibank India, Citibank Singapore and Citibank Australia. What I found was quite interesting. Essentially, Citi exported a lot of cards that were designed here to other countries, perhaps modifying them with a slight twist. For example, their generic Citi MasterCard is issued all over the world.
American Express too has presence in more countries than other credit card issuers. If you check most of Amex International website, you will find that they issue their standard Green, Gold and Platinum charge cards every where in the world. What differs though is that the Membership Rewards program varies from country to country. For example, a Platinum Card in the US has got very different benefits than from one say in Japan. I still find that the Membership Rewards for US cardholders still have the best benefits.
Partnering with local companies for affinity cards – Another strategy that issuers like Citi and Amex have used is to partner with local companies (especially airlines) and issue local airline credit cards. For example, in Singapore, American Express has the Kris Flyer Credit Card. In Australia, Citi has the Emirates Citi Platinum Card. In India, Citibank partnered with Jet Airways (not JetBlue) and issue the Jet Airways Citi Platinum Card.
Balance Transfer Offers do not exist everywhere – In the US, balance transfer offers are abound everywhere. But this is not the case elsewhere. For example, when I checked Citibank India, I could not find a single balance transfer offer on their site. Guess, not too many Indians have debt to their eyeballs like many of us here in the US. In Australia, many issuers offer balance transfer deals, but they do not offer 0% APR rate. Instead, the rate tends to be about 4% (from my observation).
Terms and Conditions are not listed in every country – If you look at Citibank India’s site, nowhere are a standard terms and conditions page to be found. Here is the US, you get a standard terms and conditions page. But on Citi India’s site, all I could find was the annual fee, nowhere could I find the the APR. On Citibank’s Australia’s site, they did list the APR but is was the monthly APR. On the Citi’s Singapore website, the APR was not listed on the site but it said it will be listed on your statements!
Annual Fees are more common everywhere else – One observation that I have is that in the US, no annual fee credit cards are more the norm. In most other international countries, annual fees are more common.
Ending notes – This is just a very brief look at credit card practices in the US and in the international markets. What I have found is that different countries have different rules and credit card issuers adjust their strategies accordingly. I think the US market is still the most competitive and that folks here still can get the best rewards and deals. Fees and rates seem to be on average lower as well. There are more deals to entice new consumers and these just seem to be lacking in international markets.