August 22, 2022
How many credit cards do you have in your wallet? One, three, five, or seven plus? These rectangular pieces of plastic with magnetic strips are frequently taken for granted as modern day society has always had them and their conveniences. Credit cards have a long and interesting history. Though they are now a ubiquitous part of our daily lives, credit cards were not always so commonplace. In fact, the first credit card was only invented in 1950!
Since the not so long ago past, credit cards have undergone a lot of changes. Today, there are dozens of different types of credit cards available, each with its own set of benefits and features. But how did we get from the first credit card to the many different kinds we have today?
Let’s take a look at the history of credit cards to find out!
The first credit card was created in 1950 by Ralph Schneider and Frank McNamara. It was originally called the Diner’s Club card and could only be used at restaurants. The Diner’s Club card was a big success and soon other businesses began to offer similar cards that could be used at their establishments. In 1958, American Express launched its own credit card, which could be used anywhere. When credit cards were introduced, it was a big change for people's spending habits. Before credit cards, people would either use cash or checks to make purchases. The introduction of credit cards allowed people to borrow money from lenders in order to make purchases. This gave people the ability to buy now and pay later.
In 1966, the Bank of America introduced the first modern credit card, called the BankAmericard. This credit card could be used anywhere and had a revolving line of credit, which meant that customers could carry a balance from month to month. The BankAmericard eventually became Visa in 1976. MasterCard was also created in 1966. Originally, it was known as Interbank Card Association (ICA).
Today, there are dozens of different types of credit cards available. Some of the most popular include Visa, Mastercard, American Express, Discover, and JCB. Each of these credit cards has its own set of benefits and features. From the first card created in 1950 to the many different types available today, credit cards have come a long way. No one knows what the future holds for sales transactions, but what is important in present day is how credit cards function. Let’s explore the difference between debit cards versus credit cards.
Debit cards were introduced in the early 1970s and were originally designed to replace checkbooks. Debit cards allow bank customers to spend money by drawing on funds they have deposited at the bank. There are two types of debit cards: ATM cards and check cards. ATM cards can be used to withdraw cash from an automated teller machine (ATM), while check cards can be used to make purchases or get cash back from a merchant. Most debit cards have dual function capabilities.
Today, debit cards are one of the most popular types of payment methods, second only to credit cards. In fact, there are more than 1 billion debit cards in circulation worldwide!
Credit cards, on the other hand, are a type of loan. When you use a credit card, you are borrowing money from the credit card issuer. You will need to repay this loan, plus interest and fees, if you don't pay your balance in full each month.
There are some key differences between debit and credit cards. Debit cards are linked directly to your bank account, so once you have spent the money in your account, you cannot spend any more. Credit cards are not linked to your bank account but instead are linked to a line of credit that has been extended to you by the credit card issuer. This means that you can continue to spend money even if you don't have any money in your bank account until you reach the allowable credit limit set forth by the credit card company.
Another key difference is that debit cards offer very limited protection against fraud compared to credit cards. If your debit card is lost or stolen, someone can use it to withdraw cash from your bank account or make purchases using your account. This can leave you in a difficult financial situation. Credit cards offer much better protection against fraud, as you are likely only liable for a small portion of the fraudulent charges.
So, which type of card is right for you? It depends on your spending habits and your financial goals. Many credit card companies offer financial rewards for using their card and lending money from them. Plus, paying off credit card balances in a timely manner helps you to establish excellent credit. If you are careful with your spending and always pay off your balance in full each month, a credit card may be a good choice for you as you can reap the benefits of the rewards that are offered by the credit card company. If you sometimes carry a balance or want the added protection against fraud, again a credit card may be a better choice. However, if you want to use your bank account to make direct payments without having to go through a 3rd party, a debit card might be the better choice for you. If you think you will not be a responsible spender, you should stick to a debit card as there is a potential for high interest rates and fees associated with credit cards.
Let’s break it down even more. Advantages of the credit card are as follows:
-Build your credit history: One of the biggest advantages of having a credit card is that it can help you build your credit history. Your payment history is one of the most important factors in your credit score, so by making on-time payments with your credit card, you can give your score a boost.
-Earn rewards: Another big advantage of credit cards is that many of them come with rewards programs. You may be able to earn points or cash back on your purchases, which can save you money or give you the opportunity to earn travel rewards.
-Convenient: Credit cards are also very convenient. They can be used anywhere that accepts credit cards, which is most places. And if you have a problem with a purchase, you can usually dispute it with your credit card issuer and get your money back.
Disadvantages of credit cards:
-High interest rates: One of the biggest disadvantages of credit cards is the high interest rates they often carry. If you carry a balance on your card from month to month, you will accrue interest charges that can add up quickly. And if you only make minimum payments, it could take years to pay off your debt.
-Fees: Another downside to credit cards is the fees that many of them charge. Annual fees, late payment fees, and foreign transaction fees can all add up, and they can offset any rewards you may be earning.
-Debt: Finally, one of the biggest disadvantages of credit cards is that they can lead to debt. If you're not careful with your spending, it's easy to rack up a large balance on your card that you may not be able to pay off. This can damage your credit score and put you in a difficult financial situation.
You may also be wondering; how does the credit card company calculate the minimum payment on my credit card? When you receive your credit card statement, you'll see a minimum payment amount listed. This is the minimum amount you must pay to keep your account in good standing. Your minimum payment is typically calculated as a percentage of your total statement balance, which includes any interest and fees that have accrued. The exact percentage varies from issuer to issuer, but is typically between 1% and 3%. For example, if your statement balance is $5,000 and your minimum payment is calculated as 2%, your minimum payment would be $100. If you're able to pay more than the minimum payment, it's always beneficial to do so, as it will help reduce your overall debt more quickly. However, if you find yourself unable to make anything more than the minimum payment each month, it's important to contact your issuer to discuss other options, such as a hardship program or debt management plan. Making at least the minimum payment on time each month is essential to maintaining a good credit rating.
Now that you understand the history of credit cards and the advantages and disadvantages of having a credit card, will you choose a debit or a credit card? Both options have their pros and cons, but hopefully this article has helped you make an informed decision. Credit cards can be helpful in building your credit score and provide other benefits like rewards points and travel insurance. But if you’re not careful, they can also lead to high levels of debt. Debit cards are safer because they don’t allow you to spend more than you have in your account, but they don’t offer the same perks as credit cards. Ultimately, the decision is up to you – just be sure to weigh all the pros and cons before making your choice.