The Encyclopedia Britannica defines credit as "a transaction between two parties in which one (the creditor or lender) supplies money, goods, services, or securities in return for a promised future payment by the other." The concept of credit was already used in the earliest period of history in Assyria, Babylon and Egypt.
The use of credit card was first used in the US in 1920 by some automobile owners who used cards to buy fuel. However, these cards were accepted only to the establishment who issued it. By 1938, a number of companies started to accept each other's card.
There is an amusing story behind the origin of the first official credit card. According to the story, in 1949 Frank X. McNamara, head of Hamilton Credit Corporation. was having dinner with Alfred Bloomingdale and his attorney Ralph Schneider at the famous Major's Cabin Grill, a restaurant beside the Empire State Building. They were going to discuss a credit problem with one of his clients who was unable to pay him back. At the end of the meal, Mr. McNamara realized that he has forgotten his wallet so he called his wife to bring him some money. From this incident, an idea came to life. So in 1950, Diners Club was founded and the first "multi-purpose" credit card was born.
A credit card gives its holder the privilege to make purchases without cash and pay for it on a later date. When a person opens a bank account, he may apply for a credit card in order to receive a specified credit limit equivalent to cash. The bank assigns a certain interest rate per month, and this will be charged on the account whenever the credit limit is exceeded or whenever there is an unpaid balance past due.
For many people, owning a credit card has become a lifestyle. When applying for a credit card, it is always advisable to do extensive research on the different terms and conditions that each bank offers. Doing so enables the customer to choose the type of credit account that is best suitable to his needs. It is also important to understand all stipulations before signing up to any agreement. Because credit cards allow for more freedom to buy, it is a common tendency for many people to splurge and overspend, frequently resulting with unpaid bills and increasing debt. To avoid the misery of bad credit, one must learn how to use his credit card wisely. It is sensible to always pay all balances on time and to know when it is necessary to make another purchase. Thus, owning a credit card also involve self-discipline, modesty and good financial management.
Clearly, credit cards play a major role in business transactions all over the world today. It is used in almost every business establishment around the globe. It also dominates the world of online shopping and e-commerce. Truly, credit cards has come a long way and it is interesting learn how it all began.
