Spending boom on the cards for the euro

Credit and debit cards will be the best way to spend the EU currency from next year, writes Juliana Ratner

CREDIT CARD executives are hoping the switch to a single currency by 11 members of the European Union next year will be a bonanza for plastic money.

Consumers are expected to use credit cards more after the move to the euro on 1 January, because the single currency will encourage cross-border spending as price comparisons between the 11 countries become easier. And until the new coins and bills become available in January 2002, credit cards will be one of the easiest ways to make purchases in euros.

Larry Chimerine, an economist at MasterCard, said conversion "will be a boon" to European card spending, resulting "in greater usage than what would normally be expected". He said the increased charges from the euro will add to the growth already expected as a result of normal business expansion.

Industry executives and analysts aren't specific about how much of a boost they expect the euro to give to card use. Visa International expects "a stepped increase" in spending on its cards in EU countries next year. A spokesman for Visa's EU region, Peter Halliday, said growth next year would exceed this year's 25 per cent projected increase, though he wouldn't say by how much.

Spending on all cards in all of Europe - excluding the euro effect - is on track to rise 15 per cent this year, said US firm RK Hammer Investment Bankers, a consultant to the industry.

The euro will be introduced in January as an accounting unit when the exchange rates of the first 11 member currencies are locked together. The value of the German mark, for example, will be fixed at 3.3539 French francs and 990.002 Italian lire.

Those marks, francs, lire and eight other currencies will continue to exist as subdivisions of the euro for three years. Shoppers at a Munich boutique will still hand over German bank-notes when paying in cash. Euro banknotes and coins will not appear until January 2002. Until then, anyone wanting to pay in euros will have to use plastic or personal cheques.

Euro notes and coins will circulate in parallel with national banknotes for up to six months. In July 2002 all national notes will be pulled from circulation and the euro will become sole legal tender in the monetary union.

Travel between member countries will increase as consumers find spending money in other countries easier, said Eric Sagerman, an American Express senior vice-president in charge of international product development.

"We think people will put it on plastic," Mr Sagerman said. American Express will introduce new card products after the conversion in countries where consumers are likely to increase card use, he said.

Of the 1 billion general purpose cards worldwide, Visa cards account for 58 per cent, MasterCard has 33 per cent, American Express and Japanese Credit Bank each represent 4 per cent of cards, and Diners Club accounts for 1 per cent.

Purchases on credit, debit and smart cards which contain a computer chip that stores "money", are sure to increase because they are "the only way to use the euro in the first three years," said Mr Halliday.

Visa hopes that the first three years of the euro when coins and notes won't be available will be a "habit-forming period" Mr Halliday added. Purchases on Visa cards accounted for 53 per cent of worldwide purchases on credit and debit cards.

Even after 2002, some analysts expect card spending to increase as consumers and merchants use cards more as a familiar form of payment to avoid the new bills and coins. "From practicality on the merchants' side and the ease of use on the consumers' side, it all points to higher spending on credit cards," said the chairman of RK Hammer, Robert Hammer.

In the EU region spending on all Visa cards, which include credit, debit and smart cards, was $392bn (pounds 240bn) last year, up 24 per cent from 1996, Mr Halliday said. Spending on MasterCard products in all of Europe was $145.1bn last year, up 21 per cent from 1996, a spokeswoman said.

The euro will make comparing prices from country to country easier for consumers, said Ian Coles, director of business relationships at Household International. A cardholder in Germany who buys something from another member country will know exactly how much his credit card will be billed. Currently, a consumer in Germany will not know what conversion rate he is charged on a purchase in France until the bill arrives, which will include a foreign exchange surcharge.

Europeans will be quicker to buy items from other countries after the conversion, said Mr Sagerman of American Express. "If you're sitting in Germany now, you don't really think about buying something in France," he said. After 1 January 1999, though, it will be easy to see if something in France is cheaper than the same item in Germany. If it is cheaper, the consumer in Germany can "call them up and have them deliver it, like you do from New York to California," he said. "And he's not going to spend cash."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
ebooksNow available in paperback
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum