Credit cards got their start in the United States just before the beginning of World War I. Department stores began the practice of issuing dog-tag style metal plates to their favorite customers.
In 1951 Franklin National Bank of New York created a credit card which could be used at many different types of merchants. Other banks began their own programs, and then the very large Bank of America in San Francisco started its own card, the BankAmericard, which has evolved into the modern-day Visa card. Other California banks implemented their own programs, which later became the MasterCard of today.
Fake Cards and other problems stemming from the relentless card-pushing by banks led directly to the passage of the Fair Credit Billing Act of 1974 as well as many other laws designed to protect the consumer .
A credit card is a system of payment named after the small plastic card issued to users of the system. In the case of credit cards, the issuer lends money to the consumer (or the user) to be paid later to the merchant . It is different from a charge card , which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions , and are the same shape and size, as specified by the ISO 7810 standard.
As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses , which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback ).
Some countries, such as the United States , the United Kingdom , and France , limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen.
Standard credit cards These credit cards are the most common and are readily available from most banks and financial groups. They are unsecured, which means you do not have to put down a security deposit to prove the money can be repaid. The way the annual percentage rate is offered or calculated for these cards can vary. Here are two examples:
Balance transfer credit cards Balance transfer credit cards allow consumers to transfer a high interest credit card balance onto a credit card with a low interest rate. Typical in the market today are balance transfer credit cards with an introductory annual percentage rate (APR) of 0 percent, with that introductory or "teaser" rate lasting several months up to a year. The terms of balance transfer credit cards varies between offers, so be sure to thoroughly read the terms and conditions for each card. Compare balance transfer credit cards .
Low interest credit cards Low interest credit cards offer either a low introductory APR that jumps to a higher rate after a certain period, or a single low fixed-rate APR. Low interest cards can be very useful when consumers need make a large purchase because it allows several months to a year to pay it off with very low or no interest. Before using a low interest card, read all the terms and conditions of the introductory rate so you will not be surprised by fees or accumulated interest. Compare low interest credit cards .
Credit cards with rewards programs Reward credit cards allow users to earn incentives for making purchases with their credit card. Points accumulate for each dollar charged on the card, and cardholders can redeem these points for various rewards. Reward cards usually require better-than-average credit for approval. There are 7 major types namely :
Bad credit and/or credit repair cards Credit can easily go from good to bad due to poor budgeting or simply by an overlap between jobs. If your credit score is less than satisfactory, it does not mean you cannot qualify for a credit card. There are several options available to those who have had bad credit in the past and for those who are currently trying to repair their credit. Depending on your specific situation, debt consolidation or use of introductory APRs on balance transfers may be wise choices. If you still need credit or want to start repairing your credit by proof of action, there are several credit cards designed to help rebuild poor credit histories.
Secured credit cards Secured credit cards require collateral for approval. A security deposit of a predetermined amount is needed in order to secure the credit card, and the security deposit generally needs to be of equal or greater value than the credit amount. Collateral can come in the form of a car, boat, jewelry, stocks or anything else of monetary value. Secured credit cards are for people with either no credit or poor credit who are trying to build or rebuild their credit history. Prepaid credit cards Prepaid cards are not credit cards at all, but are used and accepted just like them. The advantages of prepaid cards is that there are no finance charges and they help you avoid debt since all purchases are paid for beforehand. With these cards you determine the credit line by transferring however much money you'd like to have available to spend to the card. This eliminates the risk of running up credit card debt and makes the budgeting process much easier.
Specialty credit cards These types of cards are for consumers with unique needs for their credit use, such as business professionals and students. These credit card programs are designed specifically to meet the needs of those individuals.
Business credit cards These cards are available for business owners and executives and have many of the same features as traditional credit cards: low introductory rates, cash back programs and airline rewards. The difference is these cards come with many additional benefits and perks exclusively for those in the business world. Some of these bonuses include: Business expenses kept separate from personal expenses; special business rewards and savings; expense management reports; additional cards for employees; and higher credit limits. Every credit card is a bit different and promotional offers often change, so be sure to thoroughly look over the terms and conditions for each specific card before applying.
Student credit cards Many college students need a credit card, but they generally have little or no credit history, which makes it difficult to get approved for a traditional card. Student credit cards are specifically designed for those enrolled in accredited four-year colleges and universities to help them build a credit history from the ground up. Compared to consumer credit cards, student credit cards are often scaled back somewhat in terms of rewards, features and other benefits, but they can still be a valuable commodity. If used wisely, a student can take the first step towards building a solid credit history with this type of credit card. Once they've proven financial responsibility, it will be much easier to qualify for reward cards and higher credit lines.