China UnionPay, a world leader in credit card payment processing

In the U.S. Visa and Master Card are household names.  But have you heard of China UnionPay? Due to its affiliations with Visa, Master Card and American Express, it is accepted in more than 135 countries and regions, China UnionPay is a world leader in credit card payment acceptance and processing.  The Shanghai based China UnionPay is owned by 85 Chinese banks including the Chinese government and is the world’s second largest credit card processor behind the Visa card.  China UnionPay was founded in March of 2002 and it is the only interbank network in China.  China’s credit card processing is expected to increase to $397 billion by 2015.  In the U.S., Citibank ATMs accept the card for withdrawals in dollars.

The recent rise of UnionPay has been a boom for those merchants that offer luxury goods such as Italian leather handbags and French perfumes.  Chinese customers are the world’s number one for luxury items.  The Chinese government requires all automated tellers in China as well as all Chinese merchants to use UnionPay electronic payment system for local payments.  Because of that Visa, Master Card and American Express pays a certain percentage of their transactions to UnionPay.  The U.S. government considers this as unfair trade practice.

Monitor your credit report and watch your credit score

Three major credit bureaus, Equifax, Experian and TransUnion, keep a close watch on your financial dealings.  They not only keep your credit history, they calculate a score for you.  Better known as the FICO (Fair Isaac Corporation) score, it is the widely used measure by all major financial institutions before considering you for a mortgage loan, issuance of any credit card or store card, and many other things.  If your score is low or you have derogatory comments on your credit report, your application for new credit or credit line increase could be denied.  The law allows you to obtain a copy of the credit report once a year free of charge from each credit bureau.  One good strategy is to obtain a copy of your credit report once every four months from one of the three credit bureaus.  However, the law doesn’t require them to provide a score, so they may charge for it.  If an agency denies an application for credit, they are required to provide you with reasons for denial.

Your credit score is calculated based on your payment history (35 percent), credit utilization (30 percent), length of credit history (15 percent), credit mix (10 percent), and applying for new credit (10 percent).

Who is processing credit and debit cards?

Credit and debit card purchases accounts for 30 percent each of retail transactions in the U.S.  Visa and Master Card dominates the retail sector credit and debit purchases while American Express, Discover Financial Services and VeriFone fills the remainder.  Both Visa and Master Card are much popular in overseas and international transactions generate more than 60 percent of Master Card revenue and about 45 percent of Visa revenue.  Ample growth opportunities exist in the overseas markets for all card processors because more than 85 percent overseas transactions are still in cash.

Visa and Master Card gets about 10 cents of each $100 transaction.  They do not hold any credit risk and collects fixed per-transaction fees, service fees based on transaction size and cross-border transaction fees.  Banks who issue cards under Visa and Master Card licenses collect funds from the customer accounts.  However, American Express and Discover provide financing to their customers and therefore, hold more risk.

In the U.S., most cards still use the magnetic strips which are more prone to fraud.  Both Visa and Master Card are pushing retailors to use the global standard, a “chip and pin” system.  With the “Chip and pin” system it is harder to steal card numbers.

Who is keeping your credit information?

Many of us are very familiar with the three digit FICO (Fair Isaac Corporation) score.  It is important in determining new credit as well as the interest rate charged to you.  The higher the score, the lower the rate a lender will charge you for your car loan, insurance premium, revolving credit such as credit cards and your mortgage.

There are three major credit bureaus that keep tab on your credit: Equifax, Experian and TransUnion.  The law allows you to obtain one free copy of your credit information per year.  However, the free report may not provide you with a score and you may have to pay to get it.  Many lenders use the FICO score to determine new credit lines as well as to increase credit limits.

All credit bureaus consider your payment history (35 percent), credit utilization (30 percent), length of credit history (15 percent), credit mix (10 percent) and new credit (10 percent) in order to come up with a FICO score.  One proven strategy to obtain a higher score is to use only one half of your credit limit on each card.  Additionally, pay the monthly minimum due amount on time, and limit the number of credit lines available to you.

Paying off your credit card bills

It is that time of the year that you use your credit cards to buy holiday gifts and next month you receive your bill from each credit card company.  With limited budget, it is obvious that we don’t have enough money to pay off all credit card balances and we have to pick which to pay off first.

One strategy that some people use is to pay off the smallest balance first and pay the minimum on others.  Not a bad strategy, but consider the following.

Some advice to pay the credit card balance with the highest interest rate first.  Not a bad idea either.  This will allow you to save on interest charges.  However, you may not get the same satisfaction as having one less card to pay if you can’t pay the entire balance.

Your credit card balances as well as the number of credit lines open have a direct link to your credit score.  If your balance is closer to the limit and you have too many cards, you may get a lower score.  Also important is the payment when it is due.  Late payments could result in a lower score.  One strategy is to maintain a balance no more than half of the limit.