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Friday, 21 August 2015

Things You Always Wanted to Know About the Credit Card

The term “credit” has been around since the concept of exchanging of goods and services was practiced by merchants during the early years of trade spawned our society for what it is today. Credit was a convenient method of how to sell goods and services without the need for the buyer to produce cash for a particular transaction. Nowadays, credit cards are used for these methods of “cashless” transactions that offer instant credit to the consumer without the need for bringing with them cash on hand. During the early days of it's existence, credit card holders would have to verify their identity, their billing address and the terms of payment that would be manually recorded by the receiving sales person of the business establishment where it was presented. This was a very time consuming method that created long lines when using this method. 

Nowadays, each credit card has it's own unique identification number that contains the complete details of the person who's account the credit card belongs to, taking away the need for writing down the details of the account and transaction that has taken place, making it one of the most convenient method of paying for products or services for that purpose. The first historically recorded use of the credit card was traced back to the 1890's in Europe. The first credit cards involved the merchants that were offering their products and services to their customers, as opposed to what is popularly practiced today by banks. Merchant were the first one's that issued credit cards to their customers and were very selective about it, often choosing their regular customers as a way of saying thank you for patronizing their establishment.
It later caught on in the United States during the early 1920's as business establishments such as oil companies and hotels began to formally offer them to their customers. It should be interesting to know that the first credit cards were not made of plastics but were originally made of metal in the form of coins or tokens. It then evolved using metal plates, celluloid (plastic films), fiber and paper. The very first bank issued credit card was issued by the Flatbush National Bank of Brooklyn. New York under John Biggins in 1946.
Biggins conceptualized a “charge it” method that was in principle, between the bank, it's customers and the merchants that were also holding accounts in the same bank and the surrounding areas near Brooklyn. The concept involved the merchants who had been depositing their accounts into the Flatbush National Bank included the particulars of the transaction of a sale that used the “charge it” method which included depositing the sales slip that the merchant and the customer had undergone the transaction. The bank, then issued a bill to their account holding customer to notify them of an outstanding liability that the customer who used the credit card was obliged to pay through the bank itself.
It was a generally easy and convenient method to consider that favored the particular customer that used the credit card, but underneath it all, was a fairly complex accounting process that had to be carefully worked out by both the bank and the merchants accountants. For more information on how to become an accountant or tips for accountants, visit
The credit card was a fairly new way of giving purchasing conveniences for people who had an existing bank account with banks who issue this new form of financing instrument as it was only limited to a certain point of use and only over a certain area in which merchants and banks could easily exchange financial information regarding a common customer. It was not until in 1950 that the credit card had found a new form of use in regards to paying for other services or products. The Diner's Club started to issue their own credit card which purpose was to conveniently pay for restaurant bills and other food related services. Frank McNamara, who founded Diner's Club, created a method in which a customer can conveniently eat at a restaurant that accepted a Diner's Club credit card. In return, Diner's Club would directly pay the restaurant, leaving the obligation of the customer to pay their outstanding liability to Diner's Club. This was technically a direct debit card since the credit card holder had to pay the whole amount to Diner's Club.
In 1958, American Express initiated the issuance of their first credit card which was soon followed by the Bank of America with their BankAmericard which is now popularly known as Visa. Credit cards found their popular national use through promoting it to traveling salesmen who often travel from coast to coast. It provided a means of for these traveling sales men to pay for their board and lodgings and even food while they were frequently moving from one state to another. The dawn of the 1960's saw more companies that offered the convenience of credit cards through mass media advertisements which gave credit cards the image of a time saving instrument rather than that of an instrument of credit, and it was during this era that American Express and MasterCard became hugely successful overnight.
The United States Congress began regulating the use and governing policies of the method of using credit cards. In the middle of the 1970's, Congress started to ban some credit card issuing companies that were intentionally mailing activated credit cards to people who did not even ordered or requested them, as it was insinuating a compulsive means to entice people to use credit cards that may eventually lead them to unnecessary incurred debt.

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