As we all know, modern life could not even be imagined without credit cards. In today’s world, hardly anyone is carrying cash around and everything is charged through our plastics. However, certain forms of credit cards have been circulating the market long before most of us are even aware of.
The first such form appeared in 1900s, when major department stores and oils companies started issuing their own form of proprietary cards which one was able within the issuing institutions and other limited locations. The idea was to create a bond between the customer and the company and develop a relationship that was based on mutual trust and loyalty. The nature of modern credit cards is different. They are used as a practical device to save time and make the flow of currency faster and easier.
In 1946, the star was born and the first credit card by the name of charg-it appeared on the market. The father of the credit card was John Biggins, a banker, and the card was used as a paying device by all the people that had a bank account in Mr Biggins’ bank (since the bank was reimbursing the money to the merchants who accepted the card as a valid paying option). Of course, the payment potential was limited to local stores only.
In 1951, another card entered the market and although it was originally created for NY Franklin National Bank loan clients, account holders were allowed to use it as well.
With the appearance of Diners club and American Express cards, the market will never be the same.
The systems and rules have been changing in the course of time and the operational and transaction system have been keeping up with the demands of the modern business world and life style. At the beginning, card holders had less flexibility when it came to managing their money and paying off credit card expenses. However, the issuing institutions have changed their methods and rules became less demanding and rigid. In 1959, a revolving balance system was introduced and paying of credit card bill in full could be postponed instead of settled at the end of an each month.
There are two major system of the way a credit card is operating – closed and opened loop system. As the name implies, the closed loop system limits the interaction and it involves the card user, consumer and the merchant. In this system, the issuer is in control of all transactions and deals with the user and the merchant directly. The representatives of the closed loop system would be Diners Card and American Express.
The other system refers to the credit cards that can be used more widely (Visa, MasterCard) and they represent the valid form of payment in a majority of cases.
Recently, other forms of online payment are becoming popular and highly exploited, but having in mind how available and practical this piece of plastic still is, many years will pass before a credit card becomes obsolete and disappear from the scene.