Have You Ever Wondered How Credit Cards Work?

By Titus, Nancy Raiden | THE JOURNAL RECORD, September 4, 1991 | Go to article overview
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Have You Ever Wondered How Credit Cards Work?


Titus, Nancy Raiden, THE JOURNAL RECORD


OK, so you skipped the soggy barbecue and spent the holiday weekend shopping, deftly wielding your plastic to get optimum benefit from advertised Labor Day specials. Ever wonder how those charge slips which you left with merchants from department stores to restaurants get back to your account? And how do those out-of-state charges find their way home to your monthly statement?

Unlike checks which have the Federal Reserve as a nationwide clearing infrastructure, credit card transactions must use private networks such as the one provided by Oklahoma City's United BankCard Inc., 5700 N. Portland

The company is the largest Oklahoma-based issuer of credit cards, with about 150,000. It offers such affinity or lifestyle cards as its popular Oklahoma Heritage and a new Cherokee Nation Visa. The cards donate a small fee for each transaction to an affinity organization: the Oklahoma Heritage donates funds to a roadside wildflower program for Oklahoma highways, and the Cherokee cards donates to the tribe. United BankCard also works with 200 banks in the state to provide customers with national franchise cards with local bank nameplates.

"The other side of the business is clearing for merchants' credit card transactions," said George Carlton, president. "There is no Federal Reserve or government-sponsored organization to route credit card transactions like there is for checks. And we do it more cheaply."

About 10,000 merchants deposit work through the company, representing an average of about 500,000 sales transactions per month, he said.

"Banks are reluctant to become involved in the merchant side of the business. A small bank in rural Oklahoma may have 30 merchants. Credit cards are for strictly retail organizations. Those banks cannot afford to have somebody learn all the technicalities of the business. It's a game of numbers."

He said the processor of the transactions also has to be available to handle special circumstances that could arise with a retailer who is still at work at night or on a weekend.

"You cannot have that merchant stranded."

Consumer buying habits also drives usage of credit cards.

"Saturdays are big. Mondays are dead, and Tuesdays are the worst.

March is low, but December is very large," he said.

United BankCard's merchant base "spans from merchants with two transactions per month to department stores that handle them electronically through their cash registers."

The evolution of such electronic technology has dramatically changed the industry of processing credit card transactions.

"We are not even in the same business we were three years ago because of the advent of an electronic network that didn't exist. The rate of exchange simply didn't exist then."

The company has about 15 of its 54 employees dedicated to the clearing side of the business, Carlton said. . .

Barry L. Anderson was appointed cashier of Farmers & Merchants Bank of Crescent, replacing Lavone Phelan who retired Sept. 1 after 23 years.

Anderson has seven years of banking experience and joined Farmers & Merchants in 1987.

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