UNIVERSITY OF SAN CARLOS OF GUATEMALA

CHIMALTENANGO UNIVERSITY CENTER (CUNDECH)

CAREER: PUBLIC ACCOUNTING AND AUDIT
NINTH CYCLE
COURSE: ACCOUNTING VII

"CREDIT CARDS"

TEACHER: Lic. Edgar Rolando Sutuj Estrada

Chimaltenango, March 27, 2019

CREDIT CARDS
PRODUCED BY:

ROLANDO ANTONIO SALAZAR ANDRES

201541259
(GROUP COORDINATOR)

GLADIS WALESKA VELÁSQUEZ BATEN 201344028

IRVING ADOLFO K´AT TELEGUARIO 200912942

JOSELINE MANUELA CASTRO MUX 201343935

LILI JANETH GUARCAX YUCUTÉ 201541059

MAURO FILIBERTO SINAY CAN 201444307

 INDEX
Page
INTRODUCTION
Yo
CHAPTER I
CREDIT CARDS
1.1 CREDIT 1
1.1.1 Definition 1
1.1.2 Credit history 2
1.1.2.1 Credit in the Middle Ages 2
1.1.2.2 Credit in modern times 3
1.1.2.3 Credit in the contemporary age 4
1.1.3 Advantages and disadvantages 4
1.1.3.1 Advantages of credit: 4
1.1.3.2 Disadvantages of credit 5
1.2 CREDIT CARDS 6
1.2.1 Historical background 6
1.2.1.1 Origin and development of credit cards in Guatemala 7
1.2.2 Definition 8
1.2.3 Functions 9
1.2.4 Classification 10
1.2.5 Advantages and disadvantages 11
1.2.5.1 Advantages 11
1.2.5.2 Disadvantages 11
1.2.6 Means in which the credit card operates 12
1.2.7 Benefits 12
1.2.8 Monetary implications of the credit card 13
1.2.9 Legal nature of the credit card 14
1.2.9.1 Theories that explain the legal nature of the credit card 15
1.2.9.2 Elements 16
1.2.10 Credit card issuing banks 17
1.2.11 Legal, economic aspects and regulatory laws of credit cards in
Guatemala 18
1.2.11.1 Political Constitution of the Republic of Guatemala 19
1.2.11.2 Law of Banks and Financial Groups 19-2002 19
1.2.11.3 Commercial Code Decree 2-70 20
1.2.11.4 Penal Code Decree 17-73 20
1.2.11.5 Civil Code Decree Law 106 21
1.2.11.6 Value Added Law (VAT) Decree 27-92 21
2.1 ACCOUNTING INSTRUCTIONS MANUAL 22
2.1.1 Mandatory 22
2.1.2 Objectives 23
2.1.3 Account integration 23
2.1.4 Journal record of accounting operations 24
2.1.5 Coding and numbering 24
2.2 JOURNALIZATION 25
2.2.1 Entry of credit card plastics 26
2.2.2 Credit limit authorization 26
2.2.3 Membership fee 26
2.2.4 Use of plastics 26
2.2.5 Consumption receipts and other receipts received by the entity for
payment 27
2.2.6 Payment to affiliated establishments 27
2.2.7 Cash withdrawals 28
2.2.8 Decrease in margin 28
2.2.9 Interest capitalization 28
2.2.10 Payments made by cardholders 29
CONCLUSIONS 30
RECOMMENDATIONS 32
BIBLIOGRAPHY 33

TABLE INDEX

No. Description Page

1 Account coding structure 26

TABLE INDEX

No. Description Page

1 Credit card issuing banks 19

 INTRODUCTION
The University of San Carlos de Guatemala (USAC) through the Chimaltenango
University Center (CUNDECH). In the ninth cycle of the Public Accounting and
Auditing career, in the Bank Accounting course, which aims to ensure that the
student applies skills, knowledge, and abilities, which have been acquired in
professional training. In the first cycle of 2019, it established the research topic
called “Credit Cards.”

The present research work shows the analysis of the issue of credit cards, whose
current creation constitutes a simplification in the evolutionary chain of the
exchange of values, issued by a bank or a financial entity, which authorizes the
person in whose favor it is issued to use it as a means of payment in businesses
affiliated to the system, by signing it and displaying it, being a financing modality
today.

The results of the study carried out are reflected in this work; which consists of a
single chapter: in which the background of credit, advantages and disadvantages
of the use of credit, as well as its definition, will be developed.

In chapter I , the historical background of the credit card is revealed; whose

emergence is linked to the development of commercial activities, important
aspects such as functions, classifications, monetary implications of credit cards
as well as credit card issuing banks, legal, economic aspects and regulatory laws
of credit cards in Guatemala .

While chapter II is focused on the accounting of credit card issuing companies.

Yo
This chapter presents examples of accounting items related to credit cards.

Finally, the conclusions and recommendations are presented, which have the
objective of making known the results obtained in general from the research.

ii
 CHAPTER I
CREDIT CARDS
The possibility of the credit card definitively replacing paper currency as a means
of effective payment seems incredible but is by no means remote. Below are
some important concepts to understand the subject of credit cards.

1.1 CREDIT
Credit or credit contract is a financial operation in which a person makes a loan
for a certain amount of money to another person and in which the latter
undertakes to return the requested amount in the time or period defined
according to the conditions established for said loan.

1.1.1 Definition
The word “credit” comes from the Latin word “trust.” This means that someone
trusts the other person to repay the money borrowed.

In a general sense, credit is the exchange of a currently available asset for a

promise to pay with interest.

As indicated in the definition of credit, the word credit means: deserved

credibility, but it is also synonymous with good reputation, authority, fame, trust.

Confidence on the part of both parties that each one will fulfill the agreed
commitment. Confidence of the person receiving the credit in the entity or
person granted to them, that they receive a good product, in quality, service and
guarantee, confidence in
 2

who grants the credit, who receives it, that he will pay the credit granted in the
agreed manner and on time.1

1.1.2 Credit history

The system of exchange or barter of goods encouraged man to request credit for
his agricultural and commercial activities from other people, who were generally
representatives of the Church.

Credit in ancient times, although credit must have appeared almost together with
exchange, its use had great limitations in Antiquity, since the majority of loans
were intended to finance unproductive expenses. For the same reason, lenders
took great risks that the laws sought to avoid, severely sanctioning debtors in
case of non-compliance. In Rome, the nexum put the debtor in the hands of the
creditor, who could dispose of his life.

The credit business was generally in the hands of gentlemen, an intermediate

social class between the plebs and the aristocracy, who in the last years of the
Republic, used their great fortunes in loans to nobles and commoners.2

1.1.2.1 Credit in the Middle Ages

The church, by extending its predominance over temporal governments,
rigorously imposes its evangelical precepts, going so far as to list interest-bearing
loans among the causes of excommunication. But the expensive life of medieval
lords and the trade that was reborn after the barbarian invasions, encourages
this type of loan and leads to the creation of countless tricks designed to
circumvent this prohibition. For this reason, Sixtus V, in 1580, equates to loans

1
Dictionary, definition of credit (online) Accessed March 14, 2019. Available at:
http://Tododeiure.host.sk/diccionarios/juridico_c27.html
2
History of credit. (online). Accessed March 14, 2019. Available at: http://debthelpnow,
 3

all those conventions in which there is no equality of risks and benefits between
the contracting parties.

The situation began to change fundamentally in the 13th century, as a

consequence of the general reactivation of commerce and industry brought about
by the Crusades; From then on, theologians, who had always accepted
compensation for consequential damage (default interest), began to justify
compensation for lost profits (common interests), in an increasing number of
cases. The prohibitions only ceased in the 17th century, when, as a
consequence of the new distribution of forces, the Church could no longer
impose itself on the national governments that were already acting, under the
influence of the nascent commercial law.3

1.1.2.2 Credit in modern times

During the 15th-16th centuries, as a result of the discovery of America and the
disappearance of feudalism, the development of credit had renewed impetus,
since both colonizing companies and the activities of centralized governments
required large sums of money.

Commercial progress and, consequently, that of credit, surpassed a new stage in

the 17th and 18th centuries, when banks began to apply, on a regular basis, the
practice of discounting documents, made possible by the generalization of the
endorsement, which It eliminates the cumbersome procedures for transferring
credits. The appearance of powerful auxiliaries of credit contributes to the
spread of credits.4
1.1.2.3 Credit in the contemporary age
Starting in the 19th century, credit became extraordinary, when the industrial
revolution required the constant supply of capital as a fundamental requirement

3
Ibid.
4
Ibid.
 4

for production. The large capital required to finance new industries and the
increasingly rapid commercial turnover bring three direct consequences:

1) The creation of large deposit banks, in which the capital necessary to finance
industry is accumulated;
2) The dissemination of credit titles, through which wealth is mobilized;
3) The internationalization of credit. These facilities, while allowing a fabulous
credit development, revealed in the first half of the 20th century the
inconveniences derived from the uncontrolled use of this economic resource.5

1.1.3 Advantages and disadvantages

Credit provides flexibility in financial planning since it allows us to have those
things that we need and want to buy now and pay later. It also makes it easier to
buy big-ticket items, like a car or a house.

Credit itself is neither a negative nor a positive thing; This can be used
intelligently or not. Credit, when used carefully, helps make life more comfortable
and enjoyable. However, reckless use of credit can lead to serious financial
problems. Therefore, it is necessary to consider the advantages and
disadvantages of credit operations before using credit.
1.1.3.1 Advantages of credit:
 Helps improve the way of living.
 For the company, it gives the ability to take advantage of sales.
 Enable purchasing large or high-priced items and paying for them over time.
 Replaces the transportation of large sums of cash. It makes the management
of global expenses more effective.
 It can help against inflation.
 Helps manage financial emergencies.

5
Ibid.
 5

 Provides a method to keep savings intact.

1.1.3.2 Disadvantages of credit

 Compromises future income or profits.
 Provides a false sense of financial security.
 Your cash savings decrease, derived from high debt. Includes financial
charges on purchases of items or services.

Using credit is not simply finding what you want or need and “charging it on
credit.” As a privilege, not a right, credit comes with the obligation to use it
wisely. The following guidelines should be considered:

 A budget must be prepared. It is necessary to make a list of all expenses,

fixed, flexible and periodic.
 Fixed expenses are those that are the same value each month: rent, utilities
on a budget plan, car payments, and savings.
 Flexible expenses are those that vary from month to month: food, gas,
entertainment, and services. Periodic expenses are those that are paid
several times a year instead of once a month: car insurance, life insurance,
home insurance, property tax, among others. Once expenses have been
determined, the total should be compared to net income.
 It is necessary to ensure that the budget has flexibility which will allow for
handling emergencies or expenses that have been forgotten or considered for
a lower value. The budget should also include short- and long-term financial
goals.
 It is important to mention that currently the use of credit is widespread,
crosses borders, and aims to displace money expressed in liquid currency;
since in one way or another money tends to disappear as the main means of
 6

exchange, since the different forms of credit have become the current
monetary instrument.

1.2 CREDIT CARDS

The incursion of the credit card as a means of payment has evolved in the
economic history of humanity, especially in the era of communication,
transactions and the acquisition of goods and services. Nowadays, the most
recent way to consume with a credit card is through the Internet, which
represents another way of consuming without having to go to the establishment
to purchase goods or services.

1.2.1 Historical background

Due to the First World War and the industrial and commercial boom of the
domestic market of the United States, the use of credit cards began mainly when
oil companies and hotel chains began to use them so that their clients could
consume in the branches of their own companies. The success and spread of
credit cards occurred later with the Second World War, when it was established
that payment by card was a mechanism that worked not only for one business
but for several businesses.
The first credit card used was Diner's Club, Inc. in 1950, which established a
system through which the owner of the card was granted a maximum monthly or
annual consumption amount and was given a signed receipt. Businesses that
accepted payment by credit card paid a percentage of the cardholder's
consumption. When businessmen noticed the success of this type of
transactions, they established another credit card, the American Express
Company, which began operating in 1958.
 7

1.2.1.1 Origin and development of credit cards in Guatemala

The credit card emerged in Guatemala in the years 1960-1961 through Cuentas,
S. A., a company established with 100% Guatemalan capital. Initially, this
company was created for the purpose of managing a credit card at a local level,
but since this business was not very prosperous, it incorporated other types of
activities into its objectives. Later, the Diner's Club credit card appeared in
Guatemala, the first international credit card represented in Guatemala. This
representation was until 1968 and remained attached to the regional territory of
Mexico until 1972, where the central offices were located.

In 1975, the company Tacre de Guatemala, S. was established. A., in order to

act as exclusive concessionaire of the Diner's Club card to operate in Guatemala,
said company began its operations with approximately two hundred cards.

Starting in 1978, Credomatic de Guatemala, S. appeared. A., representing the

Visa, Master Card brands and a card for local use, later Credomatic began its
operations in Guatemala and became the pioneer in launching a credit card at
the Central American level. Consequently, with the exclusivity of the rights in
Guatemala to issue Master Card and American Express cards, Credomatic
expands its operations and market by entering into commission contracts with
banking institutions that sought to issue credit cards of these brands. At the end
of 1999, Credomatic continued to further expand its market by obtaining
exclusive representation for the country of the American Express brand, issuing
three types of cards. This is how, starting in 1997, the credit card market began
its growth and evolution in the country, which, according to the issuing or co-
issuing company, offered a diversity and types of cards according to the needs
and expectations of people. .
 8

1.2.2 Definition
Most people get the idea that a credit card is a plastic card with a magnetic strip,
which allows us to buy instantly without having money, that is, defer the payment
we buy for the next month or even longer.

Materially, the credit card consists of a piece of plastic, whose dimensions and
general characteristics have acquired absolute uniformity, due to virtuality of use
and technical necessity. It contains the identification of the issuing entity and the
affiliate authorized to use it, as well as the temporary period during which this
instrument will remain valid. It also usually contains the signature of the
legitimate bearer and a sector with electronic entries perceptible by means of
appropriate instruments.

It is a means of payment by which goods and services can be purchased

immediately, paying in cash or through financing, replacing the use of cash and
check.6
From a legal point of view, credit cards must be issued to individuals or legal
entities and will not be negotiable. They must contain the name of the person
issuing them, the name and handwritten signature of the person in whose favor
they are issued, the period of validity and whether it is valid at the national or
international level.

It can also be said that it is a contract by which a banking company or an

authorized legal entity grants an opening of credit, of a rotating type, with a
specific amount, in favor of its client, who may be a natural or legal person, so
that Using a unique plastic card, you can purchase goods or services from
affiliated companies or establishments, whose consumption will be paid in cash,
on demand or within a certain agreed period.

6
Guatemala Commercial Code. Decree 2-70, p. 124,125.
 9

It can be seen that it is a multiple and complex legal figure. Different writers
maintain that these are three different contracts: a credit card issuance contract
between the bank and the cardholder; an affiliation contract between the bank
and the company providing the goods or services, and a sales contract between
the cardholder and the affiliated company.

In a general sense, credit is the exchange of a currently available asset for a

promise to pay with interest.

1.2.3 Functions
The credit card is a legal instrument that allows its owner to carry out certain
operations with the issuer itself or with third parties, replacing the need to use
cash, checks or other commercial documents and its main functions are:
a) Identifying function
It brings together the basic data with which the company that operates a credit
card system identifies its customers. Only with these data can the system
operate, even without the card physically existing, as occurs in cases of
telephone sales, by mail, or by advertising catalog.

b) Operational function
It is evidenced primarily in the way a credit card system operates and is
associated with the identifying function. Through the card, the user and the
merchant attached to the system recognize each other, carry out the desired
operations, and coupons are issued that carry out the operation through the
system.

Simultaneously, the operational function offers security and comfort to the user,
since when operating with it it avoids the need to transport sums of money, it is a
source of resources in cases of imminent or unforeseen need such as accidents,
 10

illnesses, trips; allows you to easily keep a record of expenses, allows you to
accumulate payments on a single date, etc.

Likewise, it is relevant for the establishment as it favors increased sales and the
offering of facilities, among other advantages.

c) economic function
The credit card allows the holder to simplify his operations with money, since it
replaces cash, having at his disposal a credit instrument that allows him to defer
the fulfillment of his obligations in money by simply presenting the card and
without the need to provide funds to the entity that assumes the debt.

1.2.4 Classification
There is a wide variety of credit cards in today's world which can be classified as
follows:

to) Debit
When the purchase amount or cash withdrawal is automatically debited from the
bank account associated with the card. This acts against the balance of the bank
account. Debit cards are usually for personal use.

b) Credit cards
When payments are made against a line of credit that the financial institution
assigns individually, taking into account the possibilities and needs of each client.
In this case, payments are made regardless of the available balance in the bank
account associated with it; In this way, the owner can choose between paying at
the end of the month or deferring payments. Your credit card can be personal or
business and also know that some credit cards have discounts on your
purchases.
 11

c) Bank cards
They are those issued by a financial entity. Within the classification of bank
cards and with the same general characteristics, there is a type of card called co-
branded cards. These cards are issued by a financial institution in collaboration
with a commercial partner.

d) Business Cards
They are those that are designed to cover the needs of payments derived from
the purchase of goods and services for private consumption.

1.2.5 Advantages and disadvantages

The credit card is a very useful financial tool if goods and services are purchased
appropriately. There are some advantages and disadvantages of owning a card.

1.2.5.1 Advantages
a) Availability of money in the form of credit whenever you need it, either when
paying or withdrawing in cash.
b) Possibility of choosing payment terms, you can have large amounts of money
and define how long you want to pay it, with the corresponding interest.
c) Make purchases anywhere in the country and even the world and also
through the Internet.
d) Avoid carrying cash.

1.2.5.2 Disadvantages
a) The interest to be paid when you choose to pay off the debt in installments.
Of course, interest increases the final cost of the purchase.
 12

b) The loss, theft or cloning of a credit card, in addition to the hassle of having to
cancel it and process a new one, can mean unrecognized charges being
made.
c) Its use without responsibility can lead to unpayable debts.

1.2.6 Means in which the credit card operates

In recent times the market for credit cards has expanded. This represents the
opportunity for the credit card issuing bank to increase its portfolio.

Launching different types of cards on the market that fit the needs of the
demander has meant an increase in the circulation of plastics and at the same
time has given businesses the opportunity to increase their sales.

Businesses seek the acceptance of credit cards as a means of payment for the
goods and services they offer, which makes the medium in which a card
operates expand.

The medium in which a credit card operates can be in a card present or card
absent environment. For example, online transactions take place in a card-not-
present environment.

1.2.7 Benefits
“The credit card as a means of payment and the effects of legal regulation on the
collection of interest”, the benefits that credit card cardholders can have, among
which the following can be mentioned:

to) Economic benefits

 Have a thirty-day credit, which is automatic and interest-free, if it is paid in full
at the end of the term;
 13

 Interest-free medium-term credit, after extension by the credit card issuing

company;
 Automatic credit increase based on consumption history.

b) Safety benefit
 It allows you not to carry a lot of cash;
 Allows you to purchase goods and services up to credit limits;
 Provides personal protection against travel accidents.
c) Convenience and speed
 Allows access to cash from ATMs;
 Facilitates payments for telephone, water, electricity, and fast food services.

d) Flexibility
 Allows reservation and rental of cars and hotels;
 Ease of financing through extra credit

and) Prestige and elegance

 The cardholder is considered a morally and financially solvent person;
 It gives the user prestige and reliability.

F) Control
 They allow the verification and control of the balance of the expenses
incurred.7

1.2.8 Monetary implications of the credit card

Although it is pointed out that the credit card aggravates the inflationary process,
since its use increases the consumption of services, it does not matter much

7
Castillo Castillo, Marylin Solange. The credit card as a means of payment and the effects of
legal regulation on the collection of interest. Rafael Landivar University Bachelor's Thesis, p. 47.
 14

whether this demand is in line with their production or not, several aspects could
be listed in which its incidence in financial economic activities is positive.

The cost of handling plastic money tends to minimize financial expenses for all
sectors involved in the operation, such as:

to) The users

b) The issuing entity
c) The affiliates

1.2.9 Legal nature of the credit card

Its legal nature is to be a contract, through which a payment instrument is
created and a specific credit is granted.

It is considered a contract, since due to its multiple relationships that the card
entails; To have support and be valid, these must be reflected in a contract since
in this way each party involved is guaranteed in a certain way that what was
agreed upon is fulfilled.

It can also be added that its legal nature determines it as a contract, since if we
establish that the contract is an agreement of wills, to create modify and
extinguish an obligation it is determined that the credit card fits perfectly into what
it is. a contract.

To frame its legal nature in a contract, it is enough to establish the variety of

relationships that the credit card has and from this we begin primarily to say that
it is a contract.
 15

1.2.9.1 Theories that explain the legal nature of the credit card
Among the theories that try to explain the legal nature of the credit card, I can
note the following:

a) Assignment theory: through this theory the assignee gives an order to the
assignee to make a payment to a third party called assignee. This theory has
been seriously challenged, since it is maintained that it is not simply a matter
of giving an order, since in any case the moment in which said order is given
is debatable, which gives rise to an extremely complex issue. On the other
hand, the cardholder or user is not the one who puts the issuer in contact with
the affiliated merchant, but rather the issuing entity, which, in conjunction with
the other elements of the trilateral relationship created through the card, puts
it in motion, and in the event that there is talk of an assignment, the issuer
would be obliged to pay the affiliate or would fall into liability.

b) Debt assumption theory: This theory indicates that the credit card is explained
as an assumption of debt used as an indirect means of granting credit. As for
the cardholder (buy now and pay later), this happens because a third party,
the issuing entity, was obligated to pay the purchaser to the seller, releasing
the purchaser's obligation, who will reimburse the sum of money within a
certain period of time. .

c) Credit opening theory: which is supported by doctrine and legislation, states

that the user, when making a sale, signs an acknowledgment of debt
corresponding to the amount of goods or services purchased from an
affiliated merchant. While the bank or the issuing company agrees with the
affiliate on a promise to assign the debt, which is what facilitated the carrying
out of a series of fraudulent businesses by the user, since the debt became
almost a simple credit without documentation. But with the opening of credit,
 16

a quick and safe way was found to force users and affiliates to pay their
obligations. The theory of credit opening has been rejected as incomplete
since although it recognizes the relationship that is created between the user
and the issuer, it forgets the one that arises between the latter and the
affiliate.

1.2.9.2 Elements
The following are personal elements that intervene in the credit card system:

a) Active subject: banking company, Financial Company or other entities that

issue and put into circulation credit cards, entering into adhesion contracts
with the taxpayers and affiliation contracts with the affiliated establishments
that accept their credit cards as a means of payment, the subjects Assets
assume responsibility for paying expenses and transactions made with the
credit cards used by taxpayers.

b) Passive subject: is the natural or legal person who is authorized to use the
credit card, establishes a connection through a contract with the active
subject, assuming that his solvency and responsibility have been strictly
verified in advance by the active subject. , prior to approval of the application
and activation of credit through the card. In the case of natural persons, they
must be over eighteen years of age, while the legal entity must be legally
constituted.

c) Affiliated establishment: is any establishment or commercial company, or

service that accepts electronically for itself or on behalf of its network the
payment of purchases with the credit card. Establishments affiliated with the
system must pay the company a commission on sales made, which is a
percentage that varies, depending on the policies of the banking institutions.
 17

d) Franchising issuer: this is the owner of a credit card brand that issues them
internationally, grants a third party or more people franchises to issue cards of
its brand in accordance with its rules and conditions, with the franchisees
adhering to its organization. , subject to the issuer's own procedures, services
and technology. Unlike franchising, the only right that is assigned
corresponds only to the use of the brand, so it is a licensor of the same, under
a trademark use license agreement.

1.2.10 Credit card issuing banks

In Guatemala, it was approximately in the 1960s that the credit card was
introduced. Visa International began to expand its market in Latin America and
in Guatemala it quickly became the credit card with the greatest presence in the
market, since most of the credit card issuing banks work with the Visa brand,
while than Master Card and American Express, are managed by three and one
institution respectively. Credomatic, Banco UNO and Banco Industrial issue
Mastercard cards, while Credomatic is the only institution that issues American
Express cards. This is because Master Card and American Express are focused
on a segment of customers with a better economic standard of living.

The financial system in Guatemala has had a series of changes, due to an

accelerated increase in companies in the industry, which has caused the
development of a more competitive market.

In Guatemala, the banks that issue credit cards can be cited in order of
importance:
 18

Table 1
Credit card issuing banks

Bank Brand Support of:

Banco Agromercantil de
Guatemala SA VISA BAM cards

Bank of Central America VISA-MASTER-

SA EXPRESS Bac-Credomatic Cards

Industrial Bank, SA VISA/MASTER Bi-credit cards

Banco Promerica, SA VISA Promerica Card

Financiera de Occident,
SA VISA Western Bank Cards

G&T Continental, SA VISA Conticredit cards

Workers Bank VISA Bantrab Cards

VISA Vivibanco Cards
Vivibanco, SA
Banco Ficohsa, SA VISA ficohsa cards

International Bank
International, SA VISA Cards

De Desarrollo Rural, SA VISA Banrural Cards

Mortgage Credit Cards

National Mortgage Credit VISA National

Source: Own creation of credit cards in Guatemala, year 2019.

1.2.11 Legal, economic aspects and regulatory laws of credit cards in

Guatemala
The applicable laws related to the provision of credit card services are described
below.
 19

1.2.11.1 Political Constitution of the Republic of Guatemala

The Political Constitution of the Republic of Guatemala, as the main norm and
the one with the highest hierarchy, is the fundamental norm and on which we can
find the legislation on which an institution as important as the credit card is
based.

The basis or what gives rise to the credit card is found in article five of the
Political Constitution of the Republic of Guatemala, which is freedom of action.
This article establishes that every person has the right to do what the law does
not prohibit; So, taking this into account, it is established that every individual has
the capacity to bind himself to a credit card issuing entity with the credit card
issuer.

In article 43 it indicates: freedom of industry, commerce and work, except for the
limitations imposed by law for social reasons or national interest. This freedom
of trade also means the ability of banks to grant credits and for them to be used
by people to acquire goods and services.

1.2.11.2 Law of Banks and Financial Groups 19-2002

The Law of Banks and Financial Groups, Decree 19-2002, as a special law,
related to the Commerce Code, Decree 2-70, is a law that helps complement the
commercial and commercial system of Guatemala.

Article 36 establishes the following: regarding companies that are dedicated to

providing financial services, which are part of financial groups, they will be
subject to consolidated supervision by the Superintendency of Banks. This
article refers to the fact that financial entities must have an exclusive corporate
 20

purpose, but one of the most important is the issuance and administration of
credit cards.

Article 41 establishes: the operations and services of a bank, specifically in

section b Active Operations number five, issuing and operating credit cards.

1.2.11.3 Commercial Code Decree 2-70

In article 757 it gives the main foundation on credit cards, in which it establishes;
that credit cards must be issued to specific people and will not be negotiable.
They must contain the name of the person issuing them and the handwritten
signature of the person in whose favor they are issued. They must also express
the territory and period within which they are valid. Where applicable, the rules
of the order letters apply to the credit card.

1.2.11.4 Penal Code Decree 17-73

The penal code, Decree 17-73, contains criminal figures that adjust to the legal
good that is injured in a certain circumstance. In relation to the credit card and
the problem of excessive charges, the Penal Code Decree 17-73 gives two
crimes that are directly related to the issue of excessive charges, these would be
article 276, said article establishes that the crime of usury requires from his
debtor, in any form, an interest greater than the maximum rate established by law
or evidently disproportionate to the benefit, even when the income is concealed
or disguised under other names.

The person responsible for usury will be punished with imprisonment of six
months to two years and a fine of two hundred thousand quetzales and article
277, which establishes what is related to usurious negotiations and indicates that
anyone who knowingly acquires, transfers or enforces a usurious credit commits
 21

usurious negotiation. commits this crime and also indicates that whoever
demands extortionate collateral from his debtor commits this crime.

1.2.11.5 Civil Code Decree Law 106

The Civil Code in relation to credit cards and excessive charges provides an
important foundation which is unjust enrichment, article 1616, which establishes
the following; The person who without legitimate cause enriches himself to the
detriment of another is obliged to compensate him to the extent of his undue
enrichment and this is also complemented by article 1617 and article 1542.

1.2.11.6 Value Added Law (VAT) Decree 27-92

Article three of the generating event, paragraph two “The provision of services in
the national territory.” Interest for service must be recorded with the
corresponding current percentage. The issuer must issue an invoice for all of the
interest charged on the client's account statement, in accordance with article fifty-
two of the Value Added Tax Law.
 CHAPTER II
ACCOUNTING OF CREDIT CARD ISSUING COMPANIES
Credit card issuing companies are obliged to take into consideration what is
established in the Manual of Accounting Instructions for Entities Subject to the
Surveillance and Inspection of the Superintendency of Banks.

2.1 ACCOUNTING INSTRUCTIONS MANUAL

In general, the accounting instructions manual is known as: “an instruction
manual that describes the policies and procedures to guide and support the
recording of a company's accounting operations.”8

In the case of financial sector institutions, the Monetary Board issued the Manual
of Accounting Instructions for entities subject to the surveillance and inspection of
the Superintendency of Banks, which came into effect on January 1, 2008.

2.1.1 Mandatory
According to article two of agreement No. 11-2007 of November 9, 2007,
modified by the resolution of the Monetary Board JM-106-2016: “It is mandatory
for banks, financial companies, microfinance entities, general deposit
warehouses, exchange houses and for those entities that are part of a financial
group: companies specialized in issuing and/or managing credit cards, financial
leasing companies, factoring companies, off-shore entities or off shore entities
and others that the Monetary Board qualifies.

8
Superintendency of Banks. ABC of Financial Education., p 8.
 23

The accounting manuals issued by the Monetary Board contain the following
sections:

 General disposition,
 chart of accounts,
 Description of accounts and registration procedures,
 Time management and
 Financial statement formats.

2.1.2 Objectives
The objectives of the accounting manual, according to the Manual itself issued by
the Monetary Board, are the following:

 Regulate and standardize the registration, valuation, presentation and

disclosure of operations carried out by banks, financial companies, exchange
houses, general warehouses, companies specialized in issuing and/or
managing credit cards, financial leasing companies, companies factoring, off-
shore entities or off shore entities and others that the Monetary Board
qualifies.
 Provide financial information as a useful instrument for decision-making by
the entities themselves and the general public.
 Assist with supervision on an individual, consolidated and associative basis.
 Facilitate the consolidation of financial information of the companies that
make up financial groups.

2.1.3 Account integration

Entities must keep the movement of all first-degree accounts in a main ledger
record; and, in auxiliary accounts, the movement of first, second, third and fourth
degree divisions, as well as information on individual account balances, such as
 24

credit and deposit portfolios. Each end of the month they must prepare more
detailed relationships or integrations of account balances (first, second, third or
fourth degree, as appropriate).

In addition, they must keep an auxiliary record, using the weighted average
method, to establish the unit cost (exchange rate) of currencies.

2.1.4 Journal record of accounting operations

Entities are required to keep the accounting, administrative and other books or
records determined by the laws or provisions that apply to them. The operations
that are recorded in them must be supported with reliable documentation that
meets the legal requirements and must be recorded on the day they occur or
when they are known.

Operations carried out through special service windows, ATMs, dispensers,

mobile units, local and departmental agencies, must be recorded no later than
the following business day, with the date on which they occurred, both in the
main and auxiliary records. , and must be reflected in the financial statements
corresponding to the same day.

2.1.5 Coding and numbering

In the manual, the coding and naming of the class, group, subgroup, account,
sub-account, sub-sub-account, sub-sub-sub-account, sub-sub-sub-sub-account,
provided in the catalog of accounts, have been structured on the basis of a
system that contemplates the different levels of groups and accounts, which are
as follows:
Table 1
Account coding structure
Classification Cluster Number of
 25

digits
Class 1
Cluster First grade group 3
Subgroup Second Grade Group 4
Account First Degree Account 6
Subaccount First Degree Division 8
Sub-subaccount Second Degree Division 10
Sub-sub-subaccount Third Degree Division 12
Sub-sub-sub-subaccount Fourth Degree Divisional 14
Source: Prepared by the authors, based on the Manual of Accounting Instructions for
Entities Subject to Surveillance and Inspection of the Superintendency of Banks.

The encoding is interpreted as indicated in the following example:

1 ASSET
103 CREDITS PORTFOLIO
1031 NATIONAL CURRENCY
103102 EXPIRED
103102.01 In Extension Process
103102.0102 Minor Business
103102.0102.01 Loans
103102.0102.0101 Trustees

2.2 JOURNALIZATION
Below is the timing of the main operations related to credit cards.

2.2.1 Entry of credit card plastics

914 REGISTRATION ACCOUNTS
 26

914103 BLANK FORMS

914103.05 Plastic Cards
999999 ORDER ACCOUNTS BY CONTRA
Registration of blank forms to be used for card issuance

2.2.2 Credit limit authorization

801 CONTINGENCIES AND COMMITMENTS
801108 FORMALIZED CREDITS PENDING
USE
801108.02 Credit cards
888888 ACCOUNTS AGAINST
Value of the authorized credit limit and/or balance pending to be used.

2.2.3 Membership fee

103 CREDITS PORTFOLIO
103101 CURRENT
103101.05 Of consumption
103101.0505Credit cards
602 PRODUCTS BY SERVICES
602105 ACCOUNT MANAGEMENT
602105.02 Credit cards
602105.0201 Membership
Membership value charged to the cardholder's account statement
2.2.4 Use of plastics
999999 ORDER ACCOUNTS BY CONTRA
914 REGISTRATION ACCOUNTS
914103 BLANK FORMS
914103.05 Plastic Cards
For the use of plastic in the issuance of credit cards (to the value of one Quetzal).
 27

2.2.5 Consumption receipts and other receipts received by the entity for
payment
103 CREDITS PORTFOLIO
103101 CURRENT
103101.05 Of consumption
103101.0505Credit cards
305 ACCOUNTS PAYABLE
305101 IMMEDIATE OBLIGATIONS
305101.01 Creditors
305101.0101 Affiliated Establishments
601 FINANCIAL PRODUCTS
601102 COMMISSIONS
601102.01 Credit Portfolio
601102.0105 Credit cards
Value of the consumption vouchers presented to the entity to be charged to
cardholders and the commission that will be deducted from the establishment

2.2.6 Payment to affiliated establishments

305 ACCOUNTS PAYABLE
305101 IMMEDIATE OBLIGATIONS
305101.01 Creditors
305101.0101Affiliated Establishments
101101 BOX
(The corresponding division)
Payment to affiliated establishments for consumption receipts (voucher)
presented for collection.
 28

2.2.7 Cash withdrawals

103 CREDITS PORTFOLIO
103101 CURRENT
103101.05 Of consumption
103101.0505Credit cards
101101 BOX
(The corresponding division)
601 FINANCIAL PRODUCTS
601102 COMMISSIONS
601102.01 Credit Portfolio
601102.0105 Credit cards
Value of cash withdrawals made by cardholders, recording the commission when
applicable.

2.2.8 Decrease in margin

888888 ACCOUNTS AGAINST
801 CONTINGENCIES AND COMMITMENTS
801108 PENDING FORMALIZED CREDITS
OF USING
801108.02 Credit cards
To reduce the credit margin for consumption and withdrawals made in cash.

2.2.9 Interest capitalization

103 CREDITS PORTFOLIO
103101 CURRENT
103101.05 Of consumption
103101.0505 Credit cards
601 FINANCIAL PRODUCTS
 29

601101 INTERESTS
601101.03 Credit Portfolio
601101.0305 Credit cards
Record of capitalized interest, charged to the cardholder.

2.2.10 Payments made by cardholders

101101 BOX
(The corresponding division)
103 CREDITS PORTFOLIO
103101 CURRENT
103101.05 Of consumption
103101.0505 Credit cards
Value of payments made by cardholders.
NOTE: In the event that companies are taxpayers subject to the Value Added
Tax, said tax must be charged to division 104101.07 Taxes, Excise Taxes and
Contributions and paid to division 305101.05 Taxes, Excise Taxes, Contributions
and Quotas, as appropriate.
 CONCLUSIONS
Below are the conclusions according to the results of the research carried out:

1. It is concluded that the purpose of the credit is to cover expenses, current or

extraordinary, in specific moments of lack of liquidity. It allows us to
manage that money by disposing or withdrawing the money and depositing
or returning it, taking into account our needs at all times, in this way we can
cancel part or all of the debt when we consider it appropriate, with the
consequent deduction in the payment of interest.

2. Credit cards have constantly evolved in recent years, at first it was unusual
to make purchases through telephone calls to companies that had this type
of service, however now it has become very practical to make purchases on
the Internet through a credit card, in conclusion, has been an evolution in
the economy of humanity, mainly for communication and acquisition of
goods and services.

3. Credit cards are financial tools which provide benefits to the person who
acquires them. It is issued by a bank or financial entity that authorizes the
person in whose favor it is issued to use it as a means of payment in
businesses participating in the system by signing and showing the card.

4. Banks that issue credit cards must have comprehensive risk management
policies, systems and processes for the purpose of identifying, measuring,
monitoring, controlling and preventing the different risk of fraud to which
they are exposed derived from the operations carried out and of the credit
card.
5. Credit cards are nothing more than credit sales plans, which use the
intermediation of an issuing company between the buyer and the offerer of
the goods and/or services, in exchange for a commission on the economic
value of those goods and/or services. or services, as well as the imposition
of various interest rates on cardholders for the use of the card,
administrative account management, as well as arrears.

6. Currently, credit cards have been a factor in the economy of Guatemalans,

since it has allowed them to acquire goods or services in an easier and
more comfortable way due to the benefits that come with using them,
however some account holders have not known use it wisely.
 RECOMMENDATIONS
Recommendations are presented according to the conclusions of the research
carried out:

1. It is recommended that the student know and study the credits as part of the
importance of the course since at some point knowledge about the subject
will be useful as an advisor or client. Having access to and knowing how to
use credit is essential for daily life. Learning about this powerful tool allows
you to use it better and gain quality of life. Credit, in the best possible
conditions, can be the way to achieve goals or can give you helps in a
difficult moment or in the face of an unforeseen event.

2. Knowing that credit cards are a technological advance for the economy, it is
also important to take into account the risks that may arise, mainly with the
banking company since it provides us with so many benefits that each of
them carries a cost and if the card user is not trained to use it, they would
be spending more than they can pay, being for these people an economic
problem due to lack of training.

3. It is recommended that people who acquire a credit card obtain adequate

information before requesting it since at the time of acquiring it they contract
benefits and obligations, in the same way the user of the card must define
what it will be used for.

4. The management of a card-issuing bank must consider the importance of

implementing an adequate risk management system, since the lack of
preventive controls can cause excessive risks of credit card fraud to be
assumed, thereby exposing the financial, legal and operational situation of
the bank.
5. Cardholders of any bank must be well informed regarding the contract
signed with the credit card issuing entity.

6. Every credit card contract approved by the Superintendency of Banks must

be regulatory in relation to cases of misuse of the cards, from there
establishing within its clauses easy and comfortable payment modalities that
cardholders can know how to use it.

BIBLIOGRAPHY
1. National Constituent Assembly. 1985. Political Constitution of the Republic
of Guatemala.
2. Cabrera Miralles, W. R. 2008. Participation of the internal audit in the
evaluation of risks in critical areas of a credit card issuing company.
Thesis Lic. CPA, Guatemala, USAC, Fac. Economic Sciences, 155 p.
3. Castillo Castillo, Marylin Solange. 2011. The credit card as a means of
payment and the effects of legal regulation on the collection of interest.
Bachelor's Degree from Rafael Landivar University, Thesis, 48 p
4. Congress of the Republic of Guatemala. 1970. Decree 2-70. Commercial
Code
5. Congress of the Republic of Guatemala.2002. Decree 19-2002. Law of
Banks and Financial Groups
6. Congress of the Republic of Guatemala. 1973. Decree 17-73. Penal Code.
7. Fernández Arroyo, Edy Rolando. A Model to optimize the quality of credit
card service in a co-issuing bank, May 1998, Thesis, 4.16 p.
8. Gómez Enrique, 2015. Types of credit card. (online). Accessed March 24,
2019. Available at: https://es.slideshare.net/
9. Head of the Government of the Republic. Decree Law 106. Civil Code
10. Leon Gamez, D. R. 2005. Internal audit of the client portfolio of a credit
card issuing company, Visa. Thesis Lic. CPA, Guatemala, USAC, Fac.
Economic Sciences, 197 p.
11. Samaniego Luis, 2011. Credit cards. (online). Accessed March 24, 2019.
Available at: http://biblioteca.usac.edu.gt/tesis/