How can a Credit Card be in the Checking category?!

This goes back to the funny thread about getting out of debt by passing the $100 bill down the line because that thread started my quest to understand this debt thing.

I've spent several hours tonight looking through old paperwork I've kept from various transactions in my life. One that I found is the original mailer for my NCNB Visa credit card from way back in 1989. There is a thick piece of paper with the VISA logo and some other information pre-printed on it. It has some cut out holes to hold the credit card and some computer printing on it showing that the card is issued by NCNB NATIONAL BANK OF SOUTH CAROLINA, my account number and credit line amongst other various information. There is also another piece of paper which is the original Credit Card Account Agreement.

Here is the amazing thing that caught my eye.... on the lower third of the card holder paper there is the following computer printing:


THE NUMBERS BELOW ARE MAGNETICALLY ENCODED ON THE
STRIPE ON THE BACK OF YOUR CARD. IF THESE NUMBERS
ARE INACCURATE PLEASE LET US KNOW.

CARD NO XXXXXXXXXXXXXXXX CHECKING-
SAVINGS-

NCNB BANK CARD


Does this make you say ''What?!''

It makes me say ''What?!''

I think this is deep.

How can a VISA credit card be in the CHECKING category? The answer to this must be that the credit card account is a demand deposit account, corrrect? Just like a checking or savings account. It seems that somehow the banker monetizes your signature on the agreement and creates new money that is deposited into your account. Then by some sort of trick they send you a ''statement'' each month showing that your account has recorded some purchases, and they call those purchases debits. They show last months payment as a credit. How can a ''debit'' increase the amount of a deposit account? That is not correct. Deposit account balances are increased with credits and decreased with debits. There is something very fishy going on with the method used to convey the ''statement''!

Can somebody with bank knowledge please explain this?

Maybe I am missing something here, because to me it looks like a Debit Card. Debit cards normally look like a credit card, and can be used on a credit terminal, some even have an attached credit line to them. If not using the Credit line, then the card will deduct from your checking or savings account just like a check.

Maybe I am missing your point though…

reply to post by defcon5


Actually, you are making the point that people all over the planet are confused about banking and credit. No offense intended. I did state that this was a Visa credit card. It was encoded for use at ATMs with a PIN in order to obtain cash advances. But still, that is a cash advance on my line of credit on this credit card. It is not an ATM card linked to a savings account or a checking account. It was not a debit card. I did not have a checking account or a savings account at that bank. All I had was this credit card I applied for through the mail. Remember this happened in 1989.

Here is another question... what is the accounting nature of my credit card account?

When I use electricity the electric company's meter spins, they read the meter once a month and send me a statement (bill, invoice, etc.) showing the amount of electricity I used and a total amount to be paid all at once. They don't want me making a minimum payment. They want payment in full each month. That account is.... what? A customer account? An account receivable? It is not a bank account. It is a billing account or an account used to track and itemize my electricity usage. I don't know how it is termed. What does a certified accountant call it? There must be a standard business term for it.

And along those lines what is the type of ''account'' associated with my credit card?

The bank's own piece of paper seems to show it as a checking account, which is a deposit account. If it is meant to accept my ''deposit'' then why does it work backwards with debits increasing the balance and credits decreasing the balance? There is something odd going on there. I'll admit I don't know what the heck is going on. I need to have somebody explain how this accounting method operates.

Was it a "secured" Visa?

Those are actually based on your checking account, before they give you "real" credit.

The banks make their money from debt. The more you, the consumer owes, the more the bank makes in interest payments. This scam was figured out a long time ago.

Originally posted by InertiaZero
Was it a "secured" Visa?

Those are actually based on your checking account, before they give you "real" credit.

No. It was not a secured Visa card. I did not have any other accounts at that bank. No checking. No savings. Nothing but this Visa Credit Card.

Originally posted by autowrench
The banks make their money from debt. The more you, the consumer owes, the more the bank makes in interest payments. This scam was figured out a long time ago.

I understand interest for using money. Sure.

But why the CHECKING word listed next to my credit card account number? What purpose does that serve?

Credit card account balances increase when debited.
Banks have to keep reserves on demand deposits.

How does this fit into the picture....

- - - - - - -
PART 204—RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D)
Section 204.2
(b)(1) Demand deposit means
(i) Checking accounts
.
.
.
(viii) An obligation to pay a check (or other instrument, device, or arrangement for the transfer of funds) drawn on the depository institution, where the account of the institution's customer already has been debited.
- - - - - - -

Do banks have to keep 10% reserves on credit card balances?

A demand deposit is a checking account.
A demand deposit is also an obligation.

If a customer allegedly owes the depository institution the amount in the credit card account, then why is the depository institution under obligation to pay a check (or other instrument, device, or arrangement for the transfer of funds) drawn on the depository institution, where the account of the institution's customer already has been debited.

So where is the money? It has already been debited. It is in the form of an instrument. And the bank is implying that I have to pay again.


[edit on 3-3-2010 by Cabaret Voltaire]

Let's make it real simple. The transaction in question was back in the day when the merchant would put a triplicate form in a mechanical press and make a print of the card. This was before instantaneous electronic verification was commonplace. That slip of paper was a "check" as far as the merchant was concerned, and would have to be treated accordingly.

reply to post by Cabaret Voltaire


If I have a checking account and I ask a teller to take funds out of my checking account and draw up a bank cashier's check for me, then this amount of money is immediately debited out of my checking account and placed in limbo on a piece of bank paper. That bank check has not been cashed yet so it counts as the bank's money, not my money. The money has already been debited out of my account and put into the bank's cash account, and then into the form of that bank cashier's check. That is deposit money that falls under the reserve requirements, just like when it was in my checking account.

Now, if my credit card account is debited then is the money in the bank's cash account? If so, then my so-called credit card account balance falls under reserve requirements because it is actually the bank's cash.

And if they already have the cash, then why are they implying that I must pay them again in cash equal to the credit card balance? It seems like they should take that amount from their own cash account and apply it to their payable instead of creating a receivable and implying that I owe them that amount. They've already monetized my signature and want to trick me into paying twice so they can keep one of the payments.

Originally posted by DJW001
Let's make it real simple. The transaction in question was back in the day when the merchant would put a triplicate form in a mechanical press and make a print of the card. This was before instantaneous electronic verification was commonplace. That slip of paper was a "check" as far as the merchant was concerned, and would have to be treated accordingly.

I see how you reasoned that, but I don't think that explains it.

A check is just an instrument for funds transfer. The electronic form is electronic funds transfer. In some grocery stores the person on the register can take a paper check and slide it through their machine which turns it into an electronic funds transfer right there on the spot. Check, check card, debit card, credit card or EFT... same thing.

Where is the ATS collective genius on this topic?
Somebody out there must work for a bank or be an accountant or something.
Let's get some answers in this thread!

reply to post by Cabaret Voltaire


What you initially stated about the bank monetizing on your signature was correct, in my opinion.

Originally posted by Cabaret Voltaire
A check is just an instrument for funds transfer. The electronic form is electronic funds transfer. In some grocery stores the person on the register can take a paper check and slide it through their machine which turns it into an electronic funds transfer right there on the spot. Check, check card, debit card, credit card or EFT... same thing.

That has not always been true though. A check can be any document that transfers money from one party to another, you can write a check on a napkin at a restaurant if you wish. Today you would have difficulty finding a bank who would accept it, but it can be done:

It's true you can write a "negotiable instrument," bank talk for a valid check, on just about anything. According to the Uniform Commercial Code, the body of law that governs these things, all you have to include are the name of the payee, the dollar amount, the name of your bank, your signature, the date, and some suitable words of conveyance, such as "pay to the order of." You don't need the account number or the bank ID number you find on preprinted checks.

Back in the day, before the entire world had internet access, you had a lot of remote locations where they had to use a old carbon copy slide machines, then mail in the credit card transaction to the card company, as DJW001 mentioned. If its an old card it is probably exactly the way that Dj is stating it.

Credit cards are treated as cash for most purposes. Checks can be thought of as hand written notes of a sort.

You make a purchase, the shop get the money immediately, and you now owe the bank a balance. This balance is a credit, but it was paid immediately like cash.

You have what looks to be a credit card with logos and everything, however, it is a debit card which can also be run through registers as credit.

Debit cards have account numbers and routing numbers= therefore, its just like a checking account.

Originally posted by mirageofdeceit
Credit cards are treated as cash for most purposes. Checks can be thought of as hand written notes of a sort.

You make a purchase, the shop get the money immediately, and you now owe the bank a balance. This balance is a credit, but it was paid immediately like cash.

When you say the shop gets the money, where does the money come from? What is the real mechanism of money creation being used behind the curtain at the bank?

reply to post by dgtempe


Remember that the OP said this was from 1989. Visa did not issue check or debit cards back then. I can remember the commercials for when Visa introduced the check card and it wasn't that long ago.

Oh my goodness. Somebody believes me.

It is a VISA credit card.

A long time ago I got an NCNB VISA credit card.
NCNB became NationsBank in 1991.
NationsBank acquired BankAmerica in 1998, and they changed their name to Bank Of America.
I do not have, and I never have had, a checking acount at NCNB, NationsBank, BankAmerica or Bank Of America.
I still have this credit card even though the account numbers have changed and it is still a ~VISA~ ~CREDIT~ ~CARD~.

I have never been abducted by aliens.

And I still want to know exactly the precise accounting method by which my signature is turned into money of account. I know that loans are not funded by the bank's money or the customer's deposits. The money is newly created money of account, not re-allocated money of exchange. I am asking for somebody with banking and/or accounting experience and knowledge to please explain to me how the credit extending is accomplished and by what instrument, and by what accounting procedure is it recorded under what ledger categories. I don't want to hear nonsense. I want to hear the real process which apparently is a well kept secret.

ATS reputation is on the line here! No, no, no, don't shoot me!!