Credit cards were introduced by individual corporations in America sometime before the 2nd World War. Oil companies as well as Hotel chains were the first pioneers giving their corporate cards out to individual customers, usually personnel from firms that were their largest customers. The cards offered up to a few months credit before the bill had to be paid.
A salesman working for Coca Cola could now travel all over the US and have his company pick up his travel and hotel expenses, rather than in the past the individual paying out of his own pocket and then being reimbursed. This was good business for both sides of the transaction as it led to repeat business from the card issuers while the cardholder's company could consolidate all its bills in one simple payment, as well of course as enjoying at least a month's credit.
The first piece of plastic, as we know them today, was introduced by Diner's Club with American Express soon following. In the early days they were not known as Credit cards rather Charge Cards because they offered no credit. What you spent that month you had to pay when the bill came due. Diners and American Express made their money by charging their card holders a fixed monthly fee as well as taking a small percentage fee on every transaction.
The Modern Day Credit Card is Launched
In the early 1960s the modern day Credit Card was introduced which went one step further than the Charge Card. The credit card holder when he received the bill (usually at the end of the month) now had two choices, either payoff the balance in full or pay a small amount (the minimum payment) and be charged interest on the balance until the debt is paid off.
In the early 1970s two main players evolved, Visa and Mastercard, but with the business being so lucrative for the banks and finance companies involved competition started to grow at a steady rate. It is now estimated that in 2004 there are over 250 different financial institutions just in Europe offering Credit Cards of all sorts.
Store Cards are another form of Credit Card and work in exactly the same fashion (pay off the monthly balance or pay a minimum and get charged interest on the balance) however one can only use them in the stores (or chains) that issue them. Boots, Selfridges and Marks & Spencer are among the large stores offering these style of cards. The advantage with Store Cards is that most of them offer some sort of Rewards Scheme that enables you to enjoy special offers, free gifts and air miles etc.
In this section of the LearnMoney.co.uk website we'll be educating you on exactly what credit cards are, how they can be used for your benefit, advantages, tips and much more.
