KEY POINTS:
Although credit itself has been around ever since humans started bartering goods, plastic cards are newcomers.
Most people think that the Diners Club International Card, which was born in the1950s was the first ever credit card. But there is evidence that individual shops in Europe were offering credit cards to customers in the 1890s. These "cards" weren't made of plastic. Early credit cards were made of metal or paper. And they were more like store cards, because you could only shop at the merchant that issued the card.
The first bank credit card called the Charge-It was launched in 1946, followed by the Diners Club card shortly afterwards. Today the main providers of credit cards are Visa, Mastercard, American Express and Diners Club. The Bank of New Zealand issued our first Visa card, a debit card, in 1978 and from 1980 the card became a credit card.
How they have evolved
Credit cards were first offered as a means of convenience, not to offer credit. But they have gradually evolved.
First there was the magnetic strip in the early 1970s.Then in the 1980s Visa launched its ATM network, offering 24-hour cash access. Sadly fraudsters have never been far behind the architects of credit cards and as a result the technology needs to keep improving.
In 1983 neural network technologies were developed to try and reduce fraud and in the same year Visa offered the first international prepaid card. Then in 1995 chip and pin specifications were developed.
Chip and PIN cards have not been adopted widely here, although many new EFTPOS machines are capable of handling the technology.
Our shopping habits
Kiwis are building up a reputation for shopping 'til we drop. At the end of 2007we owed a total of $4.9bn on our credit cards, according to Mastercard, which has been analysing Reserve Bank of New Zealand data.
In January of this year we whipped out our cards 83m times, more than 19 credit card transactions for every man, woman and child in the country. Women tend to be the spender gender making 80 per cent of household purchasing decisions. That's certainly what a year-long study into women's spending habits by Australasian market research company Splash found.
What's more, their spending is out of control. "Australian women are spending a lot as well, but certainly not to the extent of New Zealand women, proportionate to their income," says Splash managing director Amanda Stevens.
Women desire "one hit" on premium products and indulgences, such as shoes, designers clothing, haircuts, and pamper sessions, Stevens adds.
Because of the way they're raised men tend to accumulate money. They don't buy things because they want them. They need items.
What they often find they "need" are big boys' toys, not Clarins beauty products or a top-of-the-range bagless vacuum cleaner. They're more likely to be out there shopping for gadgets: flat screen TVs, iPhones, digital cameras, Navmans, Handycams, Nintendo Wii, cars, boats, music and videos. They're also partial to travel and fine dining when they pull out their credit cards.
Controlling your credit card
Kiwis, be they male or female, don't save enough money and need to get a grip on their spending habits. Some smart credit card users actually make money by using their credit cards. What they do is use their credit cards for every day purchases and then pay it in full every month. You can get three benefits from this sort of behaviour:
" Firstly you can earn high interest on your savings between over the month by using the interest free credit period for your credit card.
" Secondly you can earn rewards.
" Thirdly you don't need to pay EFTPOS and other fees. Spending in this way can ensure you only have one bill a month, which means you only need check your current account balance once a month - just before the Visa bill is direct debited out - or you pay it.
Budget advisers would not necessarily advise people to spend on their credit cards in favour of cash unless you pay your bill in full every month.
Get clever with credit card use
Credit may be convenient. It's sad but true, however, that whatever goes on your credit card will eventually need to be repaid. If it's not, plastic isn't that fantastic and your little card can be very bad for your wealth.
"To make credit work for you, you should use it wisely, and know your financial limits," says Wayne Besant, Managing Director ANZ Retail Banking.
Some smart ways to turn the table on high interest credit debt include:
* Not signing up for a credit card if you don't think you can resist spending.
* Shop around for the card best suited to your spending needs. Some people want the lowest monthly interest. Others are motivated by rewards.
* If you're after rewards make sure the ones on offer suit you.
* Only spend what you can afford, says ANZ's Wayne Besant. Think for a moment before you charge that item - do you really need it? Can you pay it off within a realistic timeframe? Remember that most credit cards charge additional fees for late payments.
* Don't be a card tart. Stick to just one credit card, or two at the most. Fewer cards means lower annual fees and less chance of going on a spender bender.
* Never use your credit card for cash advances. They're often loaded with instant interest charges and transaction fees.
* Don't wait until the due date to pay off your credit card. If you're being charged interest then the sooner you pay the sooner the interest charges stop mounting.
* Don't overspend. Keep track of what you're spending, this is easy to do online, and don't go beyond your limit.
* If it's getting hard, seek help, says Besant. "If you have trouble paying off your credit card, don't be afraid to talk to your bank to see if you can arrange a payment schedule that works for you." A New Zealand Federation of Family Budgeting Services adviser can also help and the service is free. www.familybudgeting.org.nz/
* If you travel often you might want to choose a card with complimentary travel insurance.
* If you have a problem spending, then don't take your credit card out in your wallet. Leave it at home. Or even better, put it in a container of water and freeze it.
