A credit card is a small plastic card issued to users as a system of payment.

It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services.[1] The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month.[2] In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 53.98 mm (3.370 2.125 in) (33/8 21/8 in) in size. The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel.[3] The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards. Western Union had begun issuing charge cards to its frequent customers in 1921. Some charge cards were printed on paper card stock, but were easily counterfeited. The Charga-Plate, developed in 1928, was an early predecessor to the credit card and used in the U.S. from the 1930s to the late 1950s. It was a 2" 1" rectangle of sheet metal related to Addressograph and military dog tag systems. It was embossed with the customer's name, city and state. It held a small paper card for a signature. In recording a purchase, the plate was laid into a recess in the imprinter, with a paper "charge slip" positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter pressing an inked ribbon against the charge slip.[4] Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates were issued by large-scale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user made a purchase, a clerk retrieved the plate from the store's files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers. In 1934, American Airlines and the Air Transport Association simplified the process even more with the advent of the Air Travel Card.[5] They created a numbering scheme that identified the Issuer of card as well as the Customer account. This is the reason the modern UATP cards still start with the number 1. With an Air Travel Card passengers could buy now, and pay later for a ticket against their credit and receive a fifteen percent discount at any of the accepting airlines. By the 1940s, all of the major domestic airlines offered Air Travel Cards that could be used on 17 different airlines. By 1941 about half of the Airlines Revenues came through the Air Travel Card agreement. The Airlines had also started offering installment plans to lure new travelers into the air. In October 1948 the Air Travel Card become the first inter-nationally valid Charge Card within all members of the International Air Transport Association.[citation needed]

The concept of customers paying different merchants using the same card was expanded in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card, and required the entire bill to be paid with each statement. That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that acquired credit card features after BankAmericard demonstrated the feasibility of the concept). However, until 1958, no one had been able to create a working revolving credit financial instrument issued by a third-party bank that was generally accepted by a large number of merchants (as opposed to merchant-issued revolving cards accepted by only a few merchants). A dozen experiments by small American banks had been attempted (and had failed). In September 1958, Bank of America launched the BankAmericard in Fresno, California. BankAmericard became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned), and with its overseas affiliates, eventually evolved into the Visa system. In 1966, the ancestor of MasterCard was born when a group of banks established Master Charge to compete with BankAmericard; it received a significant boost when Citibank merged its proprietary Everything Card (launched in 1967) into Master Charge in 1969. Early credit cards in the U.S., of which BankAmericard was the most prominent example, were mass produced and mass mailed unsolicited to bank customers who were thought to be good credit risks. But, They have been mailed off to unemployables, drunks, narcotics addicts and to compulsive debtors, a process President Johnsons Special Assistant Betty Furness found very like giving sugar to diabetics.[6] These mass mailings were known as "drops" in banking terminology, and were outlawed in 1970 due to the financial chaos they caused, but not before 100 million credit cards had been dropped into the U.S. population. After 1970, only credit card applications could be sent unsolicited in mass mailings. The fractured nature of the U.S. banking system under the GlassSteagall Act meant that credit cards became an effective way for those who were traveling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the U.S. There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), including organizationbranded credit cards, corporate-user credit cards, store cards and so on. Although credit cards reached very high adoption levels in the US, Canada and the UK in the mid twentieth century, many cultures were more cash-oriented, or developed alternative forms of cash-less payments, such as Carte bleue or the Eurocard (Germany, France, Switzerland, and others). In these places, adoption of credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada, or UK. In some countries, acceptance still remains poor as the use of a credit card system depends on the banking system being perceived as reliable. Japan remains a very cash oriented society, with credit card adoption being limited to only the largest of merchants, although an alternative system based on RFIDs inside cellphones has seen some acceptance. Because of strict regulations regarding banking system overdrafts, some countries, France in particular, were much faster to develop and adopt chip-based credit

cards which are now seen as major anti-fraud credit devices. Debit cards and online banking are used more widely than credit cards in some countries. The design of the credit card itself has become a major selling point in recent years. The value of the card to the issuer is often related to the customer's usage of the card, or to the customer's financial worth. This has led to the rise of Co-Brand and Affinity cards - where the card design is related to the "affinity" (a university or professional society, for example) leading to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group. [edit] Collectible credit cards A growing field of numismatics (study of money), or more specifically exonumia (study of money-like objects), credit card collectors seek to collect various embodiments of credit from the now familiar plastic cards to older paper merchant cards, and even metal tokens that were accepted as merchant credit cards. Early credit cards were made of celluloid plastic, then metal and fiber, then paper, and are now mostly plastic.

Credit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer. Today, every credit card carries an identifying number that speeds shopping transactions. Imagine what a credit purchase would be like without it, the sales person would have to record your identity, billing address, and terms of repayment. According to Encyclopedia Britannica, "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant's customer. Around 1938, companies started to accept each other's cards. Today, credit cards allow you to make purchases with countless third parties. The Shape of Credit Cards Credit cards were not always been made of plastic. There have been credit tokens made from metal coins, metal plates, and celluloid, metal, fiber, paper, and now mostly plastic cards. First Bank Credit Card The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York. In 1946, Biggins invented the "Charge-It" program between bank customers and local merchants. Merchants could deposit sales slips into the bank and the bank billed the customer who used the card.

Diners Club Credit Card In 1950, the Diners Club issued their credit card in the United States. The Diners Club credit card was invented by Diners' Club founder Frank McNamara and it was intended to pay restaurant bills. A customer could eat without cash at any restaurant that would accept Diners' Club credit cards. Diners' Club would pay the restaurant and the credit card holder would repay Diners' Club. The Diners Club card was at first technically a charge card rather than a credit card since the customer had to repay the entire amount when billed by Diners Club. American Express issued their first credit card in 1958. Bank of America issued the BankAmericard (now Visa) bank credit card later in 1958. The Popularity of Credit Cards Credit cards were first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. American Express and MasterCard became huge successes overnight. By the mid-'70s, the U.S. Congress begin regulating the credit card industry by banning such practices as the mass mailing of active credit cards to those who had not requested them. However, not all regulations have been as consumer friendly. In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted restrictions on the amount of late penalty fees a credit card company could charge. Deregulation has also allowed very high interest rates to be charged.

As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It wasn't until about half a century ago that plastic payments as we know them today became a way of life. Early beginnings In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled "Credit Cards and Payment Efficiency." Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service, Sienkiewicz says. The first bank card, named "Charg-It," was introduced in 1946 by John Biggins, a banker in Brooklyn, according to MasterCard. When a customer used it for a purchase, the bill was forwarded to Biggins' bank. The bank reimbursed the merchant and obtained payment from the customer. The catches: Purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins' bank. In 1951, the first bank credit card appeared in New York's Franklin National Bank for loan customers. It also could be used only by the bank's account holders.

The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he'd forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use. Plastic debuts By 1951, there were 20,000 Diners Club cardholders. A decade later, the card was replaced with plastic. Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month. According to its archivist, American Express formed in 1850. It specialized in deliveries as a competitor to the U.S. Postal Service, money orders (1882) and traveler's checks, which the company invented in 1891. The company discussed creating a travel charge card as early as 1946, but it was the launch of the rival Diners Club card that put things in motion. In 1958 the company emerged into the credit card industry with its own pruduct, a purple charge card for travel and entertainment expenses. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid). American Express soon introduced local currency credit cards in other countries. About 1 million cards were being used at about 85,000 establishements within the first five years, both in and out of the U.S. In the 1990s, the company expanded into an all-purpose card. American Express, or Amex as it often is called, is about to celebrate its 50th credit card anniversary. Closed-loop system The Diners Club and American Express cards "functioned in what is known as a 'closed-loop' system, made up of the consumer, the merchant and the issuer of the card," Sienkiewicz writes. "In this structure, the issuer both authorizes and handles all aspects of the transaction and settles directly with both the consumer and the merchant." In 1959, the option of maintaining a revolving balance was introduced, according to MasterCard. This meant cardholders no longer had to pay off their full bills at the end of each cycle. While this carried the risk of accumulating finance charges, it gave customers greater flexibility in managing their money. Bank card associations "The general-purpose credit card was born in 1966, when the Bank of America established the BankAmerica Service Corporation that franchised the BankAmericard brand (later to be known as Visa) to banks nationwide," Sienkiewicz writes. In 1966, a national credit card system was formed when a group of credit-issuing banks joined together and created the InterBank Card Association, according to MasterCard. The ICA is now known as MasterCard Worldwide, though it was temporarily known as MasterCharge. This organization competes directly with a similar Visa program.

"The new bank card associations were different from their predecessors in that an 'open-loop' system was now created, requiring interbank cooperation and funds transfers," Sienkiewicz says. Visa and MasterCard still maintain "open-loop" systems, whereas American Express, Diners Club and Discover Card remain "closed-loop." Visa and MasterCard's organizations both issue credit cards through member banks and set and maintain the rules for processing. They are both run by board members who are mostly high-level executives from their member banking organizations. As the bank card industry grew, banks interested in issuing cards became members of either the Visa association or MasterCard association. Their members shared card program costs, making the bank card program available to even small financial institutions. Later, changes to the association bylaws allowed banks to belong to both associations and issue both types of cards to their customers. Credit card processing evolves As credit card processing became more complicated, outside service companies began to sell processing services to Visa and MasterCard association members. This reduced the cost of programs for banks to issue cards, pay merchants and settle accounts with cardholders, thus allowing greater expansion of the payments industry. Visa and MasterCard developed rules and standardized procedures for handling the bank card paper flow in order to reduce fraud and misuse of cards. The two associations also created international processing systems to handle the exchange of money and information and established an arbitration procedure to settle disputes between members. Other issuers join the party Although American Express was among the first companies to issue a charge card, it wasn't until 1987 that it issued a credit card allowing customers to pay over time rather than at the end of every month. Its original business model focused on the travel and entertainment charges made by business people, which involved significant revenue from merchants and annual membership fees from customers. While these products are still in its tool chest, the company has developed numerous no-annual fee credit cards offering low introductory rates and reward programs, similar to as traditional bank cards. Another relatively recent entry into the card business is Discover Card, originally part of the Sears Corporation. According to Discover, its first card was unveiled at the 1986 Super Bowl. Discover Card Services sought to create a new brand with its own merchant network, and the company has been successful at developing merchant acceptance. A 2004 antitrust court ruling against Visa and MasterCard -- initiated by the U.S. governement and the Department of Justice -- changed the exclusive relationship that Visa and MasterCard enjoyed with banks. It allows banks and other card issuers to provide customers with American Express or Discover cards, in addition to a Visa or MasterCard. The future While the plastic card has been the standard for a half century, recent developments show alternative forms of payment rising to prominence, from online services such as PayPal to credit card keyfobs to chips that can be implanted into cell phones or other devices.

But with the sheer volume of devices in use around America whose sole purpose is to read a flat piece of plastic with a magnetic stripe, the "card" in "credit card" is unlikely to pass from the scene any time soon.

In 1730, Christopher Thompson, a furniture merchant, created the first advertisement for credit by offering furniture that could be paid off weekly. This introduced the idea that people who couldnt afford to buy big-ticket items could make regular payments until the full cost of the items were paid. That idea was picked up and used, from the 18th century until the early part of the 20th century, by tallymen. Tallymen sold clothes that the purchasers could pay for in small weekly payments. They kept a tally (thus the name tallymen) of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. During the rise of the British middle class, bankers introduced the idea of overdraft protection. This was one of the first forms of consumer credit because it was really a type of loan that kicked in automatically if an account didnt have enough money in it to cover the checks written against it. Industries recognized the need for credit The system of credit took a real turn in 1914, when Western Union, in the interest of good customer service, gave some of their more prominent customers a metal card to be used in deferring payments interest free on services used. This system became known as Metal Money.

Then another company realized the value of making goodwill gestures to their customers. In 1924, General Petroleum Corporation issued the first metal money specifically for gasoline and automotive services. They offered this first to their employees, then to select customers and then, because the system seemed to work so well, to the general public. The Ford Motor Company played a large part in creating the consumer credit business. Just like Christopher Thompson back in 1730, Ford recognized that not all Americans had enough savings to buy a Model T. Even those who did have enough might not want to put their whole life-savings into just a car. So Small Loan Companies, or Finance Companies, began making their first car loans. In the late 1930s, American Telephone and Telegraph (AT&T) introduced the Bell System Credit Card. Other industries followed suit railroads and airlines introduced similar cards. The system of credit was fast growing in popularity. But then World War II came along and, with it, came the prohibition of all use of credit and charge cards. However, as soon as the War was over, business starting booming. Travel became more popular. People were also beginning to acquire more costly modern conveniences for their homes, like kitchen appliances and washing machines. These demands on the budget made the concept of credit more popular because people could buy things with credit cards that they couldnt afford to buy with cash. So the demand for credit cards increased in ratio to the improvement in lifestyles. People wanted more and they wanted it now! Charge cards evolved as lifestyles improved After seeing these trends of increased travel and spending among those who held charge cards, banks became interested in credit cards and online banking. Since they were in the business of lending money, they saw the potential of gaining income by charging interest on credit cards.

1950 marked the real beginning of the credit card most of us are familiar with today. Diners Club, Inc. introduced the first credit card that could be used at a variety of stores and businesses. This card was established primarily for businessmen to use for travel and entertainment expenses. The Diners Club gave its cardholders up to 60 days to make payment in full. Merchants were eager to accept the card because they found that credit card customers usually spent more if they were able to charge it. The first bank to implement this system was the Franklin National Bank in New York. In 1951, after screening applicants, they issued the Charge-It card to those approved for credit. This card could be used by consumers at local retail establishments. It worked much like the credit card systems of today the consumer made a purchase using the card; the retailer obtained authorization from Biggins Bank, and closed the sale. The Bank reimbursed the retailer and collected the debt from the consumer at a later date. What a great idea for everybody involved! Other banks saw the same potential. In 1958, the Dont leave home without it card was introduced by American Express. But the first revolving-credit card was issued in the State of California by the Bank of America. The BankAmericard, marketed all across the state, was the first card to offer its cardholders payment options, where they could pay the debt in full or they could make monthly payments while the banks charged interest on the remaining balances. In 1965, Bank of America saw more potential for income and control so they issued licensing agreements to banks of all sizes across the nation. These agreements allowed the other banks to issue BankAmericards and to interchange transactions through issuing banks. Now everybody was getting in on the act! All these credit card systems they needed some regulation The credit card industry was booming! But some kind of regulation became necessary. Charge card issuing and processing became too large of a task for the banking industry to handle. In 1966, fourteen US banks had formed Interlink, an association with the ability to exchange information on credit card transactions. In 1967, four California banks had formed

the Western States Bancard Association and introduced the MasterCharge program to compete with the BankAmericard Program. By 1969, most independent bank charge cards had been converted over to either BankAmericard or Master Charge cards. As the bankcard industry grew, banks interested in issuing cards became members of either BankAmericard or MasterCharge. Their members shared card program costs, making the bankcard program available to even small financial institutions. By the mid 1970s, the credit card industry started exploring international waters. But the name America caused some problems. So, in 1977, BankAmericard became VISA. Then in 1979, MasterCharge followed suit and changed its name to MasterCard. In 1979, with the improvement of electronic processing, electronic dial-up terminals and magnetic stripes on the back of credit cards allowed retailers to swipe the customers credit card through the dial-up terminal, which accessed issuing bank cardholder information. The advantage of this system, besides saving paper, was the increased speed of processing authorizations one to two minutes. It also decreased credit card fraud. Credit cards today an abounding industry There are five leaders in the credit card industry today:

Visa International MasterCard American Express Discover Diners Club There are other check processing companies trying to penetrate the market, like Euro Card, JCB and ATM companies, but credit cards still account for over 90% of all e-commerce transactions.

Visa has been a leader in credit card innovation. This has brought them the recognition as the worlds leading credit card association, with over one billion cards being issued, and carrying over 50% of all credit card transactions conducted worldwide. Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange the forerunner of banknotes was established in the 14th century. Debts were settled by onethird cash and two-thirds bill of exchange. Paper money followed only in the 17th century. The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly. From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called tallymen because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shoppers plate a buy now, pay later system was introduced in the USA. It could only be used in the shops which issued it. The first credit card In 1950, Diners Club and American Express launched their charge cards in the USA, the first plastic money. In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. The first use of magnetic stripes on cards was in the early 1960s, when the London Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper based ticket the same size as the credit cards in the late 1960s. The word credit comes from Latin, meaning trust. Ironically. Almost half of all credit card disputes are about internet transactions. And the default rate on the 1,5 billion credit cards in the U.S. is 13%. Checks (cheques) came into use in 1875. But before you write one out you should consider how safe is your bank.