Table of Contents
BEST IELTS Academic Reading Test 496
IELTS ACADEMIC READING TEST 496 – PASSAGE – 3
IELTS ACADEMIC READING TEST – 496
READING PASSAGE – 3
The Credit Card
A short history
A credit card is a plastic card issued to users to enable them to purchase goods and services without using cash. These days, credit cards come in various types. It’s up to the holder which one to choose. With a standard credit card, the holder needs to make monthly payments on the amount of money spent. If the full amount is not paid every month, interest accumulates on the balance.
A charge card works in a similar way, except that the full amount must be repaid each month. Then there is debit card which is not a loan, as the card is linked to funds that are already in the cardholder’s bank account and they are spending money they already have. A pre-paid debit card is similar to a debit card, except that the funds have already been removed from the cardholder’s savings account and put onto the card.
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Credit cards emerged in 1950 when New York businessman Frank McNamara forgot his wallet while eating out in New York. To avoid such embarrassing occasions in the future, he created the Diners Club Card, a cardboard charge card which was accepted at two hotels and 28 restaurants. The club quickly grew to 10,000 members in its first year. After a few years, Diners Club began issuing credit cards as well, which could carry a balance and therefore did not have to be repaid in full every month and had an interest rate of 7 per cent. By 1953 it had become internationally accepted.
In 1958, other major companies came on board. These included Bank of America, American Express and Carte Blanche, owned by Hilton Hotels. Bank of America’s was the most innovative as not only was it the original plastic card, but it was accepted by different types of merchants, not just hotels or restaurants. Bank of America introduced the card with a publicity stunt by sending thousands of credit cards to people who banked at their branches in Fresno, California.
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This is known in the industry as the ‘Fresno Drop’, and it turned out to be a very expensive move as it resulted in massive fraud and lack of payments that cost the bank millions. But despite this, the bank offered the same card to all its California customers the following year. By 1961 it had started making a profit and moved into other states in 1966. This meant out-of-state banks could issue cards that would be accepted by merchants all over the USA. Bank of America’s credit card was the first credit card available which was attractive to middle-class consumers, and owners of small and medium-sized businesses.
In 1966, a group of East Coast banks started the Interbank Card Association (ICA), and soon every American bank was offering credit card services. To ease pressure on the banks and coordinate the process between merchants and banks, two nationwide organizations evolved. They are now the middlemen, making sure the transactions are legitimate before they are passed and working with the banks to complete the transactions.
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The BankAmericard eventually became Visa, which then broke away from Bank of America and now has dealings with multiple banks. The ICA increased its number of member banks and changed its name to MasterCharge, which later became MasterCard. Visa and MasterCard remain the dominant credit card services around the world today.
Different varieties of credit cards began to emerge. In the mid-1980s, department stores introduced the first cards to give cash bonuses for purchases. Card issuers, which had previously simply relied on their brands for promotion, soon realized that offering air miles for flights, gifts and bonuses on sign-up, low-interest and no-interest periods were effective measures to attract new customers.
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As the century came to an end, credit card use increased dramatically, with many customers soon foolishly spending more than they earned. Interest rates soared and many users were suddenly unable to make monthly payments, leaving them with steep penalty fees and massive debts. Credit card fraud was also a problem, and still remains so today, exacerbated by online fraudsters. During the global financial crisis of 2008, the recession and unemployment that followed meant many people were relying on their credit cards to survive in difficult times. The Credit Card Holders’ Bill of Rights was introduced in 2009 in the USA, and it gave additional consumer protections and banned card industry practices that were seen as unfair or abusive.
These days, consumers are increasingly shopping and making purchases online, which requires the use of a credit card. Around 72 per cent of Americans carry a credit card. People who have avoided their use for many years are now being forced to have credit cards to shop on the Internet. Some online merchants are beginning to accept debit cards for payment, but until this happens universally, more people are at risk of going into debt. Credit card debt is extremely high in industrialized countries such as the USA, the UK and Australia.
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Non-industrialized countries, and countries with strict bankruptcy laws, such as Germany and Italy, however, tend to have relatively low credit card debt. However, as credit card use increases in countries that are growing economically, and Internet sales grow, the risk of increasing personal debt is high. Unless credit cards are introduced and used with some measure of caution, awareness and protective legislation, the same issues that industrialized countries have today will eventually take hold of the entire world as the credit card industry continues to grow.
Questions 27-30
Choose the correct letter, A, B, C or D.
27. A card is technically only a credit card if
A. the full amount is paid every month.
B. the card is connected to a bank account.
C. the card can carry an unpaid balance.
D. no interest is payable.
28. Which incident do credit cards owe their existence to?
A. A stolen wallet.
B. An embarrassed restaurant owner.
C. A club with restricted membership.
D. A businessman without cash.
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29. Why was the ‘Fresno Drop’ a disaster at first?
A. It was expensive to deliver to so many houses.
B. It never made any money for the bank.
C. People used the cards without paying the bank.
D. The bank was not sure who they had sent the cards to.
30. What name does the Interbank Card Association now go by?
A. BankAmericard
B. Visa
C. MasterCharge
D. MasterCard
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Questions 31-34
Write NO MORE THAN ONE WORD from the passage for each answer.
When department stores introduced cards that gave cash back, credit card companies realized they could get more customers by similarly 31………. them special deals such as cash-back and air miles. Previously they had just been doing normal advertising based on the strength of their brands to 32………. people to start using their cards.
Nowadays, people seem to be unaware that if they do not pay off their cards quickly, they will be hit with high 33………. costs. Credit cards can be a trap for consumers, particularly if they fall on hard times and 34………. by living off their credit cards.
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Questions 35-40
Do the following statements agree with the views of the author of Reading Passage 3?
In boxes 35-40 on your answer sheet write
YES – if the statement agrees with the views of the author
NO – if the statement contradicts the views of the author
NOT GIVEN – if it is impossible to say what the author thinks about this
35. People should make sure they can afford the debt before they spend.
36. It was not a surprise to cardholders when interest rates rose.
37. It is not a good idea to do a lot of shopping online.
38. There should be an alternative to using credit cards when shopping online.
39. Some countries have low debt due to laws against using credit cards.
40. Developing countries will have different problems with credit cards than industrialized countries.
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ANSWERS
27. C
28. D
29. C
30. D
31. OFFERING
32. ATTRACT
33. PENALTY
34. SURVIVE
35. YES
36. NO
37. NOT GIVEN
38. YES
39. NO
40. NO
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