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Credit cards
are commonplace today as a means of payment. Credit cards are different from a “charge card” in that a charge card requires that the balance be paid in full each month. The issuer of a credit card creates a revolving account and grants the holder of the card a line of credit. The credit card allows the consumers to create a balance of debt, subject to interest being charged, that can be paid off in installments, or monthly payments. Most credit cards are issued by banks or credit unions.
The history of the modern day credit card goes back to the 1920s in the United States, when they were developed specifically for the growing number of automobile owners to purchase fuel. Western Union was one of the first to issue credit cards to its customers in 1921. The concept of customers paying different businesses using the same “general purpose” card wasn’t introduced until 1950 by Ralph Schneider and Frank McNamara, founders of the Diners Club card. Others soon followed after a period of “trial and error.” Early credit cards were mass produced and mailed unsolicited to bank customers who were thought to be good credit risks. These mass mailings were known as “drops” and were made illegal in 1970 due to the many problems they caused in the U.S. financial markets. After that, only credit card applications could be mailed unsolicited in mass mailings. In recent years, the value of a credit card is often related directly to the customer’s usage of the card and their financial worth. This has led to Affinity cards, which are cards with a design related to the “affinity” (generally a university or professional society.) Usually, a percentage of the value of the card is returned to the affinity group.
There are secured credit cards, unsecured credit cards and business credit cards. One huge problem that has developed over the years along with increased use of credit cards is identity theft. In 2009, over 11 million Americans were victims of identity theft. Credit cards are one of the main resources the thief tries to obtain. The victim of identity theft can suffer many adverse consequences, including being held accountable for the perpetrator’s actions, including huge debts on their credit cards.
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