What is a Credit Card?

Credit Card (n.) a small plastic card with a magnetic strip issued by a bank or business that authorizes the holder to buy goods or services on credit. In other words, to purchase something on the promise that you’ll pay for it later. Since the first credit card was released in 1950 (by Diners’ Club), buying with plastic has become one of the most popular ways to make purchases in the world.

Credit cards have changed the entire financial and economic face of the country. With a credit card, there’s no need to save for purchases – you can purchase on a promise against your future income. No money to buy that new sofa? No problem – just put it on your credit card. Credit cards make instant gratification a reality – until the bills come in.

Credit cards have changed the way that America spends its money. Their existence has lowered savings rates, and created an entire industry that revolves around the lending of money for the short term for small purchases. They also have made it far easier for the average American to dig himself deeper into debt than he ever imagined he could.

The original credit card was the Diners’ Club card. For a small membership fee, the card entitled diners to charge meals at 27 restaurants in New York City. Eight years later, Bank of America introduced the Bank Americard, the first bank credit card in the country. It completely revolutionized the way that business is done, not just in the United States, but all over the world.

Credit card companies enjoy one of the highest profit margins in the world – but where exactly does all that money come from? Credit card companies make their money from several sources:

There is one major difference between credit cards and charge cards. Credit cards allow you to build up debt and pay just a small portion of the amount due each month. Charge cards require that your account be paid in full at the end of each payment period. While the most well-known credit cards are bank credit cards, many stores and companies issue credit cards of their own to encourage customers to make purchases in their stores or businesses. In addition to conventional credit cards, finance companies have created a number of credit card ‘products’ that appeal to different segments of the population. These include secured credit cards, organization credit cards, cash-back and rewards credit cards and stored value credit cards. The broad array of credit cards available today means that no matter what your credit history and score, you CAN have the convenience of buying thing you want without cash.