History of Credit Cards

Credit cards make our shopping trips convenient. No longer do we need to estimate the amount of cash we’ll use or check to see if we have our checkbook in our wallet (or enough money in our checking account!). Instead, we are able to tote around a small piece of plastic to get our goods.

When you take a moment to think of everything that goes into a credit card transaction, it’s quite amazing. That piece of plastic in our wallet has been programmed with valuable information about our account so that it is able to talk to the credit card network to complete the transaction. It seems like something from The Jetsons. But the history of credit cards date back to the pre-1900s and the “modern day” general merchandise credit card made its debut in 1949 with the introduction of the Diners Club.

Infographics: History of Credit Cards © CreditDonkey

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The history of credit cards is interesting and it brings to light several areas of information that consumers need to know as they add today’s credit cards to their wallet.

Know the terms

There is a whole list of terminology that is thrown around when it comes to credit cards. These terms can be confusing, so don’t be afraid to speak up if you don’t understand all of the aspects of your credit card. A customer service representative for your bank or credit card company should be well versed in the account details and walk you through the program.

Here are some of the common terms you’ll want to know:

• Charge Card: A card that cannot carry a balance over from month to month, meaning everything charged to the card throughout the month will be due upon receipt of the bill
  
• Credit Card: A card that allows the revolving of credit from month to month, meaning the cardholder can pay off the debt over several months
  
• Annual Percentage Rate: Also known as the APR, this is the interest rate that will be applied to your card balance and will determine the cost of carrying a balance from month to month
  
• Grace Period: Period of time that you can carry a balance on your card before the APR goes into effect; if you pay off your purchase during the grace period, you will not be charged interest for that charge

Know your rates

Rates have been on the rise in recent years making it more important than ever to pay close attention to the APRs associated with your credit cards. Often, you’ll be presented with several rates at account opening:

• Introductory APR – a much lower, promotional APR; the length of the introductory APR period must be disclosed to accountholders
  
• Purchase APR – the rate applied to your purchases
  
• Balance Transfer APR – the rate applied to balance transfers; often there is no grace period for balance transfers, so interest will start to accrue immediately
  
• Cash Advance APR – the rate that is applied when you utilize your credit card to access cash; just as with balance transfers, there typically is no grace period
  
• Penalty APR – most credit cards nowadays have penalty APRs that go into effect when you are late with your credit card payment, exceed your credit limit, or default on other loans you have with the bank; once this much higher APR goes into effect, it’s often extremely difficult to get it lowered to the original rate

Know your rights

Something many consumers are not aware of is that credit card companies are able to make changes to your credit card’s APRs and fees. Thankfully, due to the Credit CARD Act of 2009, credit card companies must now provide their cardholders 45 day advance notice to changes to interest rates and fees that will negatively impact the cardholder. This provides you the time to determine if it’s worthwhile to keep the account open or if it’s time to find a card that’s better suited to your lifestyle and goals.

If your credit card company does choose to make changes to the terms of your card, you will receive a notice outlining the changes and providing instructions of what you can do to avoid these changes (i.e. how to close your account without getting charged with the new fees or rates).

(Reporting by Andrew; Infographic by Anita; Additional Writing by Meghan)

Follow @CreditDonkey or write to Andrew Green at andrew@creditdonkey.com

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