American Express Company (2)

IV
INTERNATIONAL BANKING SERVICES
During World War I (1914-1918) the U.S. government nationalized and consolidated express deliveries on American railroads, eventually forcing American Express to discontinue its express business in 1918. In an effort to maintain steady revenues, American Express diversified by offering international banking services in 1919. After steady but relatively modest overseas growth during the 1920s and 1930s, the company dramatically increased the number of its offices around the world during the late 1940s and 1950s.
V

AMERICAN EXPRESS CARD
In 1958, eight years after Diners Club came out with the first credit card that could be used at a variety of establishments, American Express introduced its own credit card. The American Express credit card offered cardholders the convenience of being able to buy goods and services without needing cash at the time of purchase. The company generated revenues by charging cardholders an annual fee and by receiving a small percentage of card purchases from participating businesses. American Express did not charge cardholders interest for using the card, but it required them to pay their balances in full each month. Within three months of the card’s introduction, half a million people became American Express cardholders. In less than ten years, 2 million people carried American Express credit cards and annual charges on those cards exceeded $1 billion.
VI

DIVERSIFICATION
During the 1960s, 1970s, and early 1980s American Express grew into a global financial giant, acquiring a number of companies, including Fireman’s Fund Insurance Company in 1968 (which it sold in 1985) and the brokerage firms Shearson Loeb Rhoades Inc. in 1981 (which later grew into Shearson Lehman Brothers Holdings Inc.), Investors Diversified Services in 1984, and E. F. Hutton in 1987.
In 1987 the company introduced the American Express Optima credit card to compete with the growing popularity of cards issued by competitors MasterCard and Visa. Unlike its original American Express credit card, the Optima card did not require cardholders to pay their balances in full each month. Instead, like MasterCard and Visa, the Optima card allowed cardholders to pay balances in installments, plus interest.
VII

RECENT DEVELOPMENTS
In the late 1980s and early 1990s a downturn in the U.S. economy, coupled with increased competition from other credit card companies, led to a sharp decrease in earnings for American Express. In 1991 the company initiated a major reorganization at a cost of $110 million. At the same time American Express invested $155 million in a reserve to cover expected losses from its various credit lines.
Harvey Golub took over as chairman of American Express in 1993. Golub sold many of the company’s holdings and cut millions of dollars in costs. Earnings at the company rose steadily during the mid-1990s, as American Express broadened its credit card business, strengthened its investment-services group, and expanded its international business holdings. The number of American Express cardholders grew from 26 million in 1993 to 59 million in 2001.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.

Getting the Best Exchange Rate When You Travel Abroad

Travel writer and consumer advocate Ed Perkins offers travelers some advice on how to lower their costs while exchanging currency. He recommends using a credit card and an ATM card to avoid the high exchange rates that are usually attached to travelers checks and the fees charged by currency exchanges.
Getting the Best Exchange Rate When You Travel Abroad
By Ed Perkins
Finding the best ways to exchange currency has always been one of the most nettlesome questions for foreign travelers. However, these days the widespread use of plastic money—credit cards and debit ATM cards—makes the question much simpler.
The best strategy for exchanging currency today may be summed up in two basic rules: Put as much of your foreign expenses on a credit card as you can, and use your ATM card whenever you need to get cash. With a little bit of background and research, you can spend more of your money on travel and less on fees.
Getting the Best Exchange Rate When You Travel Abroad
As a visitor to a foreign country you will always lose at least a little in the process of exchanging currency. Your objective is to keep that loss as low as possible. Here are some facts about currency exchange that may surprise you:
* On a retail transaction—exchanging United States currency or travelers checks for foreign currency at a bank or exchange office—you usually lose from 4 to 8 percent on the transaction. You will lose even more if you exchange currency at a hotel.
* You won’t lose less money by exchanging currency in the United States before you leave. In fact, U.S. bank rates are usually worse than bank rates overseas. Buying travelers checks in a foreign currency before you leave home doesn’t help matters: You will simply take the loss here when you buy them instead of taking it overseas when you cash the checks.
* When you use a credit card or a debit ATM card in a foreign country the least you can lose is the (approximately) 1 percent fee that the international MasterCard and Visa networks charge to make the actual exchange. With American Express and Diners Club the fee is about 2 percent.
* When you charge a foreign purchase to a bank credit card, such as MasterCard or Visa, all you lose with some cards is the 1 percent the issuer charges for the actual exchange. Other banks, however, add a surcharge of 2 to 3 percent on transactions in foreign currencies. The decision whether or not to surcharge is up to the bank that issues the card, not MasterCard or Visa. Some of the big banks that don’t surcharge are Capitol One, HFC, and US Bank. Among those that do surcharge are Chase, Citibank, First USA, and Providian. Even with a surcharge, however, you generally lose less with a credit card than with currency or travelers checks. American Express and Diners Club don’t surcharge beyond the 2 percent fee.
* When you use a debit card, such as Cirrus or Plus, to withdraw foreign cash, the conversion fee is 1 percent, the same as with a credit card. In addition, you pay a fee, established by your bank, for each withdrawal. The typical fee for an overseas withdrawal is 2 to 3 dollars, although a few banks charge more; you pay the same fee, no matter how much or how little you withdraw. A few small banks offer “no-fee” ATM cards to attract business.
* When you use a credit card to get foreign cash, the withdrawal is treated as a cash advance, and you are immediately subject to interest charges in addition to the 1 percent conversion loss and a fee of 3 dollars or more.
A basic strategy for exchanging currency
Take maximum advantage of your credit card and debit ATM card by following this basic strategy:
* Use a credit card to lose the least on your foreign purchases. By researching the different cards before you leave on a trip, you can keep your losses to around 1 to 2 percent.
* For the cash you need, keep your losses to a minimum by withdrawing foreign currency with an ATM debit card. If you withdraw in amounts of $200 or more, the percentage loss is small. If you use a credit card to withdraw cash, you’ll lose a lot more. Don’t use a debit card for small withdrawals.
* Don’t use travelers checks as your primary means of foreign payment. But do take along a few $20 checks or bills to exchange at retail for those last minute or unexpected needs.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.

Visa International

I INTRODUCTION
Visa International, credit card and payment system company based in Foster City, near San Francisco, California. Visa is the world’s largest consumer payment company, with more than one billion cards issued, more than $1.8 trillion in transactions annually, and more than half of the world’s market in transactions. Visa is collectively owned by more than 21,000 member financial institutions around the world. These institutions issue Visa cards, and each establishes the terms that it will offer to consumers, such as rates and fees.

II ORIGINS
Visa traces its roots to 1958, when Bank of America, based in San Francisco, issued the BankAmericard (see BankAmerica Corporation). At the time, many banks in the United States offered charge cards, or cards that enabled consumers to charge goods and services to an account. Banks required cardholders to then pay their account balances in full each month. Unlike charge cards, the BankAmericard offered cardholders credit privileges, so they could pay their balance over a longer period of time in increments, plus interest. Bank of America licensed the card throughout California and eventually in other states as well.
The BankAmericard suffered from transactions problems and fraud during the early 1960s because of unreliable interchange systems between Bank of America and other banks licensed to issue the card. In 1968 Dee Ward Hock, an executive of the National Bank of Commerce in Seattle, Washington, headed a committee of BankAmericard licensees that was formed to resolve the problems among credit-card issuers. Two years later Hock was instrumental in creating National BankAmericard Inc. (NBI), a consortium of BankAmericard licensees designed to conduct more reliable transactions between the banks. NBI bought the domestic bankcard system from Bank of America, and Hock became the head of NBI. By 1970 the BankAmericard and its biggest competitor, Master Charge (later MasterCard), were offered nationwide, and most banks had eliminated their own bankcard programs to join one or both of the national systems.

III VISA CARD INTRODUCED
In 1974 Hock formed IBANCO, which took over administration of BankAmericard’s foreign operations. In 1977 Hock changed the name of the BankAmericard to the Visa card. NBI became Visa U.S.A. and IBANCO became Visa International. Visa International Incorporated became the umbrella organization for Visa’s business units. Visa International and Visa U.S.A. share corporate headquarters in Foster City.

IV GROWTH
In 1977 MasterCard held 60 percent of the bankcard business, compared with 40 percent for Visa. By 1983 those percentages were reversed, making Visa the leading U.S. credit card. Credit-card use expanded dramatically in the 1980s, and Visa continued to dominate the market. Visa had 56 million cardholders worldwide in 1979, but that figure rose to 220 million ten years later.
Credit-card use continued to grow in the 1990s as businesses ranging from supermarkets to health care providers began accepting payment with cards. Visa also offered premiums, such as airline discounts, for using its card. The number of Visa cards worldwide increased from 255 million in 1990 to more than one billion in 2000. The company’s revenues grew from $720 million in 1990 to $1.8 billion in 2000.
Of the more than $1.6 trillion in credit-card transactions worldwide in 1996, 55.8 percent used a Visa card, making it the worldwide leader in the credit-card industry.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.

VISA

I INTRODUCTION
Visa, formal endorsement placed by government authorities on a passport, indicating that the passport has been examined and found valid by the nation to be visited, and that the bearer may legally go to his or her destination.

II ENTRY VISA
An entry visa signifies that the bearer has received official permission to enter a country as a visitor; it does not, however, guarantee admission. Entry visas serve the general purpose of enabling a government to limit and control the entry of aliens into a country. These visas are of two general types: the passport entry visa, which is issued to persons who wish to enter a country for a visit of stated duration, and the immigration entry visa, which is issued to persons who want to enter and settle permanently in the country.
In the U.S., the requirement of entry visas became an integral part of the immigration system in 1917. Prior to that year aliens were permitted to enter the United States without a visa but were subject to exclusion on various grounds. The immigration laws were strengthened by Congress during World War I, when strict control over the entry of aliens was deemed essential to curtailing enemy espionage and sabotage. Several enactments passed since 1918 have fully defined the visa requirements for both immigrants and nonimmigrants and have rendered them increasingly stringent. Racial restrictions on the immigration and naturalization of aliens were removed and provision was made for the immigration of defectors from Communist countries by the terms of the Immigration and Nationality Act of 1952. American consular officers may refuse entry visas to aliens only on specific grounds set forth in the immigration laws, including mental defects, affliction with a dangerous contagious disease, conviction for crimes involving moral turpitude or illicit narcotics traffic, fraud or willful misrepresentation in procuring a visa, membership in certain proscribed organizations, and prospective activities in the U.S. believed prejudicial to the public interest or dangerous to the welfare, safety, or security of the nation.
Aliens applying to U.S. consular officials abroad for immigration entry visas are normally required to present documentary evidence of their status as responsible and law-abiding citizens of their own country. They must submit to a mental and physical examination and establish their eligibility to receive an immigrant visa. Numerical limitations have been levied on the number of aliens who may immigrate to the United States each year. Certain classes of aliens, including the spouses and children of U.S. citizens, are exempt from numerical limitations. See Immigration; Immigration and Naturalization Service.

III EXIT VISA
Some nations require that their own citizens obtain exit visas—that is, government authorization to leave the country—before traveling or settling abroad. Exit visas are frequently required by countries in which unfavorable political, social, or economic conditions have resulted in a marked rise in emigration. By restricting exit visas, such countries can check or even halt the flow of emigrants. Notable among the governments that instituted the use of exit visas were the Fascist regime in Italy, from 1922 to 1943, and the National Socialist regime in Germany, from 1933 to 1945. China and a number of other countries have continued this practice to the present time.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.

CREDIT CARD, DO YOU FAMILIAR WITH IT?

Credit Card, card that identifies its owner as one who is entitled to credit when purchasing goods or services from certain establishments. Credit cards originated in the United States in the 1930s; their use was wide-spread by the 1950s. They are issued by many businesses serving the consumer, such as oil companies, retail stores and chain stores, restaurants, hotels, airlines, car rental agencies and banks. Some credit cards are honored in a single store, but others are general-purpose cards, for use in a wide variety of establishments. Bank credit cards, now also in use in Europe, are examples of the general purpose card. Establishments dispensing almost every form of product or service are honoring such cards, and it is predicted that credit cards might some day eliminate the need for carrying cash.
When a credit card is used, the retailer records the name and account number of the purchaser and the amount of the sale, and forwards this record to the credit card billing office. At intervals, usually monthly, the billing office sends a statement to the cardholder listing all the charged purchases and requesting payment immediately or in installments. The billing office reimburses the retailer directly.
Most of the work involved in credit card operations is now handled by computers. Charges for the use of a credit card are sometimes paid directly by the cardholder, and sometimes borne by the retail establishments that accept them. In the latter case, the cost is absorbed into the price of the merchandise. Department stores usually charge interest to credit customers who do not settle their bills within a month, but certain credit plans do not charge interest until a bill has been outstanding for several months. Interest rates for overdue balances are regulated by state law. A continuing problem involved in the use of credit cards is the ease with which they can be used fraudulently if stolen or lost, although the liability of the owner is limited.
Microsoft ® Encarta ® 2007. © 1993-2006 Microsoft Corporation. All rights reserved.