7.1. We are required to report whether a monopoly situation exists in relation to the supply of
credit card services in the United Kingdom (the reference services). Our terms of reference are given
in Appendix 1.1.
The provision of credit card services
7.2. Credit cards are issued by banks and building societies as part of a range of services to
clients. Credit cards provide a dual service, a method of paying for goods and services and
withdrawing cash, and also access to optional credit, up to a specified limit. Credit is available on a
month by month basis, to cover the cost of purchases subject to minimum repayments each month.
Initially this credit is free; borrowers can avoid interest charges by repaying the loan in full before
the end of the interest-free period. Credit cards are one of a variety of means of payment accepted by
traders and are one of a variety of sources of credit available to consumers.
7.3. Because it is impracticable for an individual issuer to arrange directly for his cards to be
accepted by banks and traders throughout the credit card-using world, or even, for most issuers,
throughout the United Kingdom, issuers normally join one or both of the two international payments
organisationsMasterCard/Eurocard and Visa International (Visa)which provide the services which
enable a credit card, issued by an individual financial institution, to be accepted by banks and traders
throughout the world.
7.4. A credit card issued under the MasterCard/Eurocard or Visa trade mark can be used to
withdraw cash from any financial institution belonging to the same organisation. In addition, and
more importantly in the United Kingdom, a card can be used to pay for purchases from any trader
who has agreed to accept cards issued under that trade mark. (Most traders in the United Kingdom
who accept credit cards take those issued under both the MasterCard/Eurocard and Visa trade
marks.) A trader who agrees to accept payment cards issued under a particular trade mark agrees to