“Magic” credit cards (Part One)

The credit cards that fill our modern wallet are another American invention from 1950. It was in fact developed by Frank McNamara, who came up with the “Diners Club” card, after forgetting his wallet at a restaurant. The original Diners Club card was a cardboard charge card for use at various restaurants, and the idea grew from there. American Express and Bank of America with Visa (both in 1958) introducing their own cards, followed by MasterCard in 1966 and Discover in 1986. 

In the US, many credit card operations are located in South Dakota because the state has no interest rate caps. This obviously prompted companies to move their credit card divisions in this state that can charge higher interest rates. The name CREDIT card often covers both credit and debit cards. In fact debit cards are the ones used in the majority of countries outside of America. 

For those who don’t have access to credit cards, they allow to pay what is purchased on installments but at huge interest costs. Today, about 72% of US. consumers and 75% of Canadian consumers use credit cards while they also have and debit cards, but use them much less. Globally, debit cards are more dominant, especially in regions like Asia, Europe and Africa, where credit card penetration is significantly lower. In Asia, credit card usage is low while debit and mobile payments dominate. 

In Africa and Latin America, debit cards and mobile wallets are more prevalent due to limited access to credit. Europe sees a mixed usage; debit cards are more common in countries like Germany and the Netherlands. Increasingly, credit cards offer installment options, similar to the US “revolving credit”. In France, credit cards often include “revolving credit” features, allowing users to pay in monthly installments. However, interest rates are capped by law, the current usury rate for consumer credit tops around 21.5%. 

In Germany, credit cards typically require full monthly repayment, but some banks offer installment plans separately. Interest rates are regulated by market competition, and consumer protection laws require transparency. In Spain and Italy, installment payment options are common, especially for large purchases. Many banks offer flexible repayment plans with fixed monthly amounts. Interest rates vary but are subject to consumer credit laws. 

However in the Netherlands credit cards are less common, and installment payments are rare. Dutch consumers prefer debit cards and direct bank transfers, avoiding credit-based purchases altogether. Switzerland is an interesting case, while around 76% of Swiss adults own a credit card, they still prefer to use debit cards and cash due to their strong cultural preference for, and widespread acceptance of cash. 

Still, Europeans are more debt-averse than Americans, especially in Germany and the Netherlands where installment plans are often tied to specific purchases, not general revolving balances. Google Wallet (today’s Google Pay) was released in 2011 and Apple Pay in October 2014, both based on credit cards and allowing users to pay with their Smartphones. More recently, “Buy Now, Pay Later” (BNPL) services like Klarna are increasingly popular and offer structured, interest-free installments — a modern alternative to traditional credit cards. 

Not based on credit cards but pulling from one’s bank account, Venmo started in 2009 as a peer-to-peer payment service. In many parts of the world, debit cards and mobile payments are still preferred due to cultural attitudes toward debt, banking infrastructure, and financial inclusion efforts. Tomorrow, we’ll see how interest rates fund our “Refund” programs and get us Frequent Flier miles...