Credit card firms face one cold foe: hard cash

One credit card offers miles and points for clothes purchases. Another beckons with travel insurance and discounts at movie theaters and fancy restaurants.

You’d think they would be competing against each other, but card companies must first battle a common enemy.

“Cash. We have to beat cash,” said Mitsuhiro Ohshima, manager of public affairs at American Express International Inc. (Japan).

In fiscal 2003, Japanese consumers used credit cards for shopping and taking out cash to the tune of 20.7 trillion yen, up 5.5 percent from the previous year, according to the Japan Consumer Credit Industry Association.

But the number, an estimate that has grown for nine years running, represents less than 7 percent of all purchases.

In the United States, credit cards are used for 25 percent of all purchases. Japan’s credit card use is on par with Germany’s.

Card companies are betting that the market is set to grow. Some, like Sumitomo Mitsui Card Co. and JCB International Co., are targeting citizens aged 60 and above, who have an average 23.6 million yen in savings, seven times that of a worker under 30 years old, according to the Internal Affairs and Communications Ministry.

Sumitomo Mitsui offers 10 percent discounts on 10-day luxury cruises for seniors using their card. Senior JCB users get priority on golf reservations at JCB partner retirement homes, where they can use credit cards to make payments on everything from medical bills to vending machine snacks.

The advantage of cards over cash includes buyers’ protection against theft and fraud, Ohshima claimed. Credit cards can also cut costs for small businesses, by doing away with large amounts of change they need on hand for cash transactions, he said.

“There’s so much room to grow, once people realize the merits of credit over cash, in terms of safety and convenience.”

But Yugo Tanaka, a 55-year-old owner of a restaurant serving “soba” buckwheat noodles in downtown Utsunomiya, Tochigi Prefecture, disagrees.

Each time a customer uses a credit card, a store owner could wait up to 30 days to get the cash, as most card companies pay store owners only once a month.

“That’s just not an option, when you’re already behind on payments for wasabi supplies,” Tanaka said.

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