Wednesday, September 21, 2011

How did credit cards come from?

A consumer is of credit automatically with a credit card.

When a consumer does not have cash in hand he could buy goods or services by the method of credit. However a credit card is only an automatic way of offering credit to a buyer. The consumer can speed shopping transactions with a credit card that carries an identifying number. Without a credit card, what credit purchase would be? The sales person would have to record your identity, billing address, and terms of repayment which makes the things complicated.

It is written in Encyclopedia Britannica that "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." Anyways it is as far as from 1890 that we could find references to credit cards. The merchant offered credit and credit card to their customers to do sales at that time. By 1938, companies started offering credit cards to people. They can purchases with countless third parties with credit cards today.

The Material of Credit Cards

The credit cards could be made of different kind of materials such as metal coins, metal plates, and celluloid, metal fiber, paper, however most of the cards are made of plastic.

The First Credit Card from Bank

John Biggins, the person who invented the first credit card, is from the Flatbush National Bank of Brooklyn in New York. In 1946, Biggins invented the "Charge-It" program between bank customers and local merchants. The bank billed the customer who used the card while the merchants have deposited sales slips into the bank.

Credit Card of Diners Club

The Diners Club started issuing their credit card in USA from 1950. Diners’ Club founder Frank McNamara invented the Diners Club credit card which is intended to pay restaurant bills today. Any restaurant that accepts Diners’ Club credit card will provide service to their customers if they have the card. The credit card holder would pay the Diners’ Club after the Diners Club make payment to the restaurant. Since the customer had to repay the entire amount when billed by Diners Club, the Diners Club card was technically a charge card rather than a credit card at the beginning.

In 1958, American Express issued their first credit card. And later during the same year, Bank of America issued the BankAmericard (now Visa) bank credit card.

The Credit Cards Reputation

At the beginning, credit cards were promoted to be used on the road for traveling salesmen. There were more companies offered credit cards and advertised them as a time-saving device rather than a form of credit by the early 1960s. Then American Express and MasterCard launched successfully with good reputation.

The U.S. Congress begin regulating the credit card industry by banning the practices like the mass mailing of active credit cards to those who had not requested them By the mid-'70s. Anyways, not all regulations have been as consumer friendly. In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted restrictions on the amount of late penalty fees a credit card company could charge. Credit card with high interest rate was allowed by Deregulation as well.

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