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originally made of metal in the form of coins or tokens.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 http://www.tipsforaccountants.com.
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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