The Credit Card- 70 Years of Service

Credit - the connection of the credit card - has become the cornerstone of the American lifestyle. Every U.S. household is estimated that between them at least 10 credit cards, not counting cards or debit cards home, and carries an average of $ 13,000 in credit card debt. This is not a recent phenomenon.

It was only inevitable that Americans invented the credit card. Americans have always been comfortable about using credit. Europeans began to colonize America in 1600 came from countries that had put aside old prejudices on lending and borrowing, and the new attitude toward credit were transplanted into the territory of North America.

The Americans have also always need credit: borrowing to buy land, start a business, to travel west in pursuit of valuable fur animals or in search of precious metals. Others went into debt to get to America during the first reason - as servants of the colonies, "he - or stumbled into debt, and released by royal decree to join English General James Oglethorpe in founding the colony of Georgia.

Until 1800, the United States was an independent nation, the debt is a way of life for many citizens. New York City pawnbrokers gave out loans over 149,000 separate pieces of collateral in 1828 - compared with a population of around 200,000 only. In rural areas, people bought horses, wagons, plows, seeds, watches and home furnishings on credit. Many promised to pay in full at the time of harvest; Others rely on open book credit.

Open-book credit used to purchase cheap life needs such as food and clothing. A shopkeeper allowed customers to take home the goods they need, and pay what they could afford to, giving partially, but not the entire balance each month - much like many owners of credit cards today. However, very few fell into a choking debt. Both credit card debt and open book credit classified as revolving credit.

Early 19th century, merchants also offered a non-revolving type of credit, the plan dose. These plans are limited to well-to-do customers who bought expensive items, like a piano or a carpet. By the turn of the century, the market dose was no longer confined to the rich, even working class families could buy "discretionary" goods in installments. Got to buy a dose associated with the needy. A further improvement plans installment came in the early 20th century with the introduction of the home department store card or charge card.

The card is charged for the first time offered as installment plans initially to buyers of luxury goods. By shopping the market if the card home to valuable customers, which of course made them very happy. The card house was easy: they had to carry large amounts of cash or no discomfort identification, if paid by check. The client simply presents the card home to an officer to record the sale and received a bill once a month for the value of thirty days' markets. The client settled the bill in full each month. The store charged anything for the service, but won the confidence of customers. This card costs made it easy for the store to track sales, but the biggest advantage was that the card costs increase sales per customer.

The credit history took a major turn with a new trend: an increase in car sales.

Autos were necessary, but expensive to buy as a single market. Everyone needs an automatic, and all were forced to buy cars on credit. Dose to buy cars gave respect to the purchase on credit.

The other significance of the car loan was that it allowed people to go long distances in a short time in places where they were total strangers. And what if the car broke down? This was common with the early cars. Drivers could be carried away from home, requiring costly repairs and without enough cash to pay for them.

To solve this problem, the oil companies came out with their own type of credit card. This credit card could be used to purchase oil, gas and mechanical services. Unlike the department store charge card or a card house, the oil company credit cards could be used anywhere across the country.

Thus, from the 1920's the essentials of modern credit card was at hand:

o The oil companies have shown their cards burden could be used nationwide

o needs car market showed the market on time was respectable

o Americans feel comfortable with the appropriation for centuries.

It took another thirty years before the credit card as we know it was invented. Three men managed finished this over lunch in a restaurant in New York in 1949.

He was convinced that there was money to be made in consumer lending, and tried to find a way to tap. The card debit or credit card home sales and increased customer loyalty, but without interest, charge accounts by themselves do not generate revenue. Sales dose produced the interesting, but had to cover the costs of the seller, not to earn income.

Suppose, the three asked that a third inserted itself between buyers and sellers. Suppose that third party vendors have promised many customers who will not go to them differently. Suppose that the same party that offered wealthy people with good credit records a diverse selection of businesses (not just a department store or a chain of gas stations) where you can charge what is purchased, no questions asked. There would be this good heeled spenders are more inclined to patronize those establishments that had credit? It would be business owners, looking to increase their sales and profits soar, is willing to return a small percentage compared to third that helped give them a new customer base? There would be those small percentages add up to a small fortune?

It sounded from the restaurant owner asking how business credit cards that went the way it would be worthwhile. The owner replied, "seven percent." And, Diners Club has been in business.

Early Diners Club credit card resembled a miniature books. The owner's name was on the front of the brochure's credit card; Inside were the names of the establishments had agreed to accept the credit card. The owners do not pay the interest or annual fees, but paid the entire bill their credit card every month.

By 1951, Diners Club had gone international and first appears on credit card profits. Four years later, the familiar plastic credit card, replaced the original credit card paper. In 1950, Diners Club began charging an annual fee of $ 3 and had a selection of 300 companies for more than 35,000 credit card holders. By the mid 1960's, restaurants, hotels, airlines, retailers and the like were happy to accept credit card Club Diners. The dream of the founders of a global credit card used for various markets around the world, was to take place.

Diners Club was the imitators. In 1958, American Express issued its own credit card and hotel chain Hilton introduced Carte Blanch. All three were known as travel and entertainment credit cards, which distinguish them from another type of credit card, Bankcard.

Seeing the success of Diners Club, the banks entered the credit card market during early 1950 and by 1955 over one hundred U.S. banks offering credit cards to their customers. Had done slowly the money, but they had no national distribution credit card because the law limited interstate banking. In 1958, the largest U.S. credit card operation owned by Bank of America BankAmericard, but could only be used in California.

To extend the usefulness of geographic newly developed credit card, Bank of America led the national data exchange that will allow all banks across the country to offer BankAmericard. The credit card association later transformed into Visa.




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