How Car Rentals and Credit Cards Advance Human Civilization

It struck me, looking at the requirements to sign up for an Air China co-branded credit card, just how important miles, points, and travel are to the advancement of civilization.

It’s hard to imagine a more important question in public policy, and in the history of human society, than economic growth. It makes most other questions possible.

We can talk about eradicating poverty only once we have resources with which to address such problems. Indeed, we can’t even conceive of ‘poverty’ until at least some have risen out of it. Without economic growth what we think of as poverty is just ‘the human condition’.

And what we now think of as poverty would once have been incredible riches — indoor plumbing, satellite TV (many of the slums in Mumbai even have satellite tv), there’s even a government program to hand out cell phones.

And we can understand the institutional conditions which allow for growth through travel. How easy is it to rent a car? How easy is it to get a credit card? How do those conditions vary across different countries?

The very idea of a rental car is an amazing thing. You sign a piece of paper (or, in the case of rental car memberships, you may have once signed a piece of paper or filled out an online form). After identifying yourself, you have a set of keys and you take away a $20,000 or $30,000 car on the promise that you will bring it back.

Trust is a key component that allows us to move from personal exchange among people we know directly, to impersonal exchange among people we’ll never even meet — growing the scale of exchange, and opportunities to specialization by comparative advantage and achievement of real economic scale.

The ability to rent a car easily says a lot about the conditions of the society you’re renting in.

Meanwhile, the ability to get a credit card, and have a bank make payments on your behalf on the promise you’ll pay later, plays a similar role.

Despite rapid industrialization in China, this may not yet be China’s decade… at least judging by what one must go through to get a credit card (although the increasing ubiquity of credit cards in China is a clear step in the right direction).

Just look at what it takes to get a Bank of China-Air China PhoenixMiles Credit Card.

Here’s what you have to provide:

  • You have to prove your identity. With documents. Such as providing a copy of your residency card, passport, or Residence Permit for Foreigners.
  • You have to prove you’re a permanent resident of China, Hong Kong, or Macau. With documents. Such as a water, electricity or gas payment voucher for the past three billing periods; a “Residence certificate issued by the community office”; credit card statements for the latest two months (you can get a credit card if you already have a credit card!) or individual income tax payment certificates for the latest three months.
  • You have to prove your income — not just state it. It’s like an American Express financial review, only in advance.

    You can provide payroll stubs for three months. The stubs must show a corporate or government department seal. You can show bank deposit documentation or proof of purchase of treasury or corporate bonds but those must show buyer’s name, account number and account balance).

    In lieu of proof of income you can show elite status cards — Bank of China will accept an Air China platinum, gold or silver membership card, a China Southern Sky Pearl gold or silver membership card, or an Eastern Miles Club gold or silver membership cards. You must be a current elite frequent flyer.

You don’t even scan and upload these things — you go to the counter of a Bank of China branch or mail documents in to Beijing.

Small differences in economic growth matter a lot for human well-being. When the rest of the world can go online for an app-o-rama, the world could rapidly become a much better place.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. The title of this post is a bit misleading… just because credit and identity tracking opens up new economic possibility in no way means that “car rentals and credit cards advance human civilization”…

  2. If it is any consolation, I have had these more or less same requirements when applying for an AMEX in the USA (I am a temporary resident here), plus I had to go visit the social security office and have them sign a document that I applied for social security number there (although I already had the social security card and faxed it to AMEX, of course). I ended up giving up on AMEX here, and got a Discover instead, despite being a faithful AMEX customer in two other countries… I just felt humiliated.

    Is is very easy to mock the Chinese, but in reality getting a credit card for a non permanent resident is an issue everywhere.

  3. @AmexCustmer – it’s not my intention to mock, note that here in the US there are several even mileage-earning products designed for non-permanent residents

  4. I don’t think this is very well thought out. You’re not an expert on financial globalization, credit as an economic concept, or the determinants of poverty. I’m not either, but I think you’re analysis is logically fallacious and your observed correlation lacks subtlety. I’m not trying to be rude, either; I just literally think what you’ve written, especially at the end, is incoherent in terms of trying to draw it a relationship between credit card arbitrage and human development.

    In certain key ways, the very extent of app-o-ramas are a sort of indicator of the structural maladies inherent to globalized capital flows. (Cf. Consumer credit markets and regulations in the US vs. Europe, and also key measures of development, and we might start to notice interesting patterns…) This is not to say that there’s anything wrong inherently with pursuing miles and points via credit arbitrage, as I don’t think there is; but if tomorrow you flood the market with easy credit, it’ll enrich banks and a select few, ceteris paribus. Education, public health and other key indicators of development are intrinsically related to economic growth, but sustainable, socially equitable growth and development does not follow immediately from what you have suggested.

    Credit and secure banking, with deposit insurance and the like, certainly matter. And the system of formalized trust is also important, but the jump to assume that better society inevitably results from economic growth, especially stemming from rampant consumer credit, conflates far too many factors, and is too narrow (look at housing equity bubbles and their social costs as another interesting comparison), a definition of social progress to be in my estimation easily defensible.

    Still, it’s an interesting debate, and I’ll admit that I remain somewhat conflicted on the matter.

  5. Matt is exactly right. In the car rental example, for instance: the idea of car rentals the way you describe perhaps reflects some relatively high level of basic institutional trust (the car rental company trusts me to return the car, if I don’, they trust they can recoup from perhaps my credit card or, failing that, in a lawsuit, etc.). But it’s not as if I could go to South Sudan and open up a Hertz and now they have functioning institutions. Ditto credit cards.

    This post is an example of “have a hammer and everything looks like a nail.” Hey, I love miles, points, and credit cards as much as the next guy, but let’s not pretend like what we do has some magical world-historical importance.

  6. Blah

    Apologies for the grammatical and formatting errors in my post. I probably should not write such long replies with my phone…

  7. I agree with AmexCustmer, this sounds exactly like the process in the USA for people with temporary residence status.

  8. I think folks are reading too much into the cheeky part of my post. And opening a car rental agency doesn’t drive growth, the existence of institutions which allow for car rental agencies is a precondition for growth. I’m simply marveling at the existence of stuff like rental cars and credit cards and what that says about our society, so let’s feel good about the role we play!

  9. Good article. Trust and the availability of credit, for which the easiness to rent a car or open a credit card are fine examples, are very important for economic growth and the advancement of civilization.

  10. I believe Gary doesn’t really know any better. It’s highly unlikely he has or even applied for the Bank of China Air China card. I have.

    First, for non-LPRs or those with work permits, the card is impossible to get. And that is exactly the way it should be. For those with proper documentation. Don’t believe all the requirements given. They only require all those documents for those with no demonstrated credit history. If you have any type of decent credit history documented in the national credit bureau, you will not need any documentation except for a copy of your ID. And even then that may not be required.

    If you do not have an established credit history in the US, most lenders will tell you to FOAD. The good thing about Bank of China is they will allow you to submit documentation to demonstrate income and residence stability and then approve you. Try that with Chase, Gary.

    Comparing apples & oranges doesn’t help your point.

  11. Ah, the old discredited conservative attack that poor people aren’t really poor because they have indoor plumbing and a phone.

  12. Seems to me like they just want to keep out churners, mileage program gamers, and people who don’t live anywhere the bank has a presence and instead reserve the card for people who actually might use the thing as designed. Seems like a perfectly reasonable idea to me. Maybe I am simple-minded.

  13. It is not too much different in a first world country such as Singapore to get a credit card even for its citizens (well, apart from you can fax your documents). I think the truth lies much more in the fact that fraud is prevalent in some of these countries. The insistence of original documents is to lower the banks’ risks in lending their money.

  14. In fact, getting a credit card isn’t too bad. China has one of the world’s most complicated internet banking systems for all its banks. A non-IE browser will never be able to open most Chinese internet banking because they have to be sure who you are. They also have to install many controller software, encryption certificates, USB dongles and transaction signing devices, anti-phishing software onto your computer (plus your active mobile phone) in order to grant you access to its internet banking facilities. Technology wise, it is sophisticated. But it is just inconvenient because of again, fraud.

  15. Are there such mile-earning cards for non-permanent residents? Maybe you could do a short post on this…

  16. Are you suggesting that a lending institution verifying identity and income prior to the extension of credit is a bad idea? Seems reasonably prudent to me.

  17. What hogwash.
    Getting a credit card in France is more difficult than getting one in China.
    Why bash China and not even to speak of the documents you require to get on in France or the UK.

  18. This is how credit systems in the USA worked 40 years ago, well before automated credit history and scoring.

    Eventually China will reach a critical mass and be able to adopt Western methods for automated credit surveillance and that will open the spigots to everyone getting cards.

  19. @ Chinatrvl: You don’t know what you’re talking about. While France may be different, getting a credit card in the UK is extremely easy. I’ve done it a number of times with a simple online application and I’m not even on the electoral role.

    @ Ben: China doesn’t need “Western standards” as their own standards are, in most cases, already superior. They have an automated credit reporting system far superior than ours. They have more cards in circulation than we have, yet their NPL losses are lower. They actually dare issuing credit to those nationals w/o credit history and come out ahead.

    Only drawback, perhaps, is their collection practices are draconian. But then that might not necessarily be bad.

  20. @ Goh: Actually documentation is required almost exclusively from expats who are not legal permanent residents and Chinese nationals w/o an established credit history. If you have a verifiable credit history, you need not provide any documentation. You can pick up your credit card at a bank branch near your home and at that point you will need to show your ID card.

    You are wrong about online banking. I use Safari and Firefox and they work fine 95% of the time. You usually do need Java enabled and have to download a captcha management program, but a USB device is usually not required unless you intend to make transactions to third parties in excess of approximately $90,000.

    Many Chinese banks have online banking systems light years better than most US banks. Most also gave iPad and iPhone apps that require no security devices.

  21. @J.C.: The proof of income for Chinese nationals has always been imposed. Either you have to submit a piece of paper from your company or they will in fact call up your HR to verify.
    I agree that some banks started giving away the IE-kernel based internet banking security due to growing number of Mac OS users (however when you need to sign transactions using dongle, they might not work either). But not all banks. Try one of the big four (agricultural), you will be surprised. In fact, there were newspaper articles criticising the banks on this a few months ago.
    As for the dongle, there is a summary page on transactions limits from alipay on all banks. Most banks support up to 5000 CNY daily cap without dongle.

  22. @ Goh: Agricultural Bank, ICBC, Bank of China and China Construction Bank all work fine on Firefox and using their USB Key. In fact, ICBC is moving away from using USB devices and has started to issue a password generator token very similar to what HSBC Hong Kong now requires. To log on and perform most simple everyday transactions no security device is necessary.

    Also, you are wrong about income verification. If you submit your application without it, you will still be approved if you have a verifiable positive credit history in the People’s Bank of China Credit Reference System. I have credit cards from every single bank in China with the exception of small, regional insignificant banks — well over 3/4 were obtained without submitting any documentation whatsoever except for the occasional ID check when I pick up the card at my local branch. I compare notes and experiences with my colleagues and often we apply together. Documentation is not necessary for approval unless you have no established credit.

  23. @J.C.: It is true that some banks have moved away from USB dongle and IE. Definitely, Agricultural is not. I just tried. CGB has moved away for view-ing mode, but for transaction signing, IE is still needed. If I am not wrong, same for CCB. ICBC is inevitably the most advanced one in this regard since the beginning of Chinese internet banking era. Even that, they also have a list of supported browsers and versions. For Chrome, they only support up to 24.9 falling far behind thethe latest 31.0.

    About proof of income, there are provincial decisions to waive certain requirements in bigger cities. It is not a rule. Banks will state on its application page that they may require income proof. Like I said, they can phone up your HR, rely on PBOC credit file or anything directed by this provincial headquarters. Try applying for a card in a smaller town.

  24. @ Goh: I use Firefox and log on to each of the Big Five every day. I only use USB devices on ICBC and never any problem. I don’t need a USB device for the others since I don’t use them for external transfers. I use the same banks iPad apps without problem and without security device.

    You are still wrong about proof of income. First of all, the only large banks that do not have centralized credit card approvals are ICBC, CCB, ABC and BoC. BoC and ICBC are starting to centralize, but I doubt ICBC will ever be able to. Every other bank makes centralized approvals in one of three places: Shanghai, Beijing or Shenzhen / Zhuhai. The specific card Gary posted about is approved exclusively in Beijing. So whether I applied in Beijing, Shanghai or some poor farming village the documentation required (in this case NOT required) is the same. For ICBC, decisions are not made anywhere except in the provincial capital. As a result, applying in Guangzhou or Maoming is the same. You do NOT need proof of income.

    The latest card I applied for was done in Guizhou. They don’t make dungholes any worse. Approved without any documentation. I did show ID when I picked up my card. I wasn’t the only one to do it. If you applied without submitting documentation and they refused you, it must be because you have no credit or crappy credit.

  25. @ Goh: P.S. They do not phone your HR. No bank here is that stupid. You are just extrapolating on what you think they should do. Most large companies — and every multinational company worth anything — will never verify employment with anybody over the phone. In fact, most multinational will not even transfer you to any extension outside the switchboard unless you have the full name of the employee you wish to speak to and often their extension number, too.

    Any other novel ideas?

  26. One forgets that these credit cards and car rental businesses exist because they are profitable, money making entities despite the risks and occasional run amok or deadbeat customer. I think that is the real miracle and advancement of society. Profit exceeds risk. No one is solely working / acting out of the goodness of their heart!!

  27. @ Goh: Sure, when you work in a shoe factory or a tiny representative office, they can call your HR. When you are in a large multinational nobody ever gets past the switchboard unless they gave a name and extension number. Ever. If it weren’t like that, there would be a never ending series of sales calls, job seekers or, even worse, head hunters trying to snipe your staff.

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