Ever wondered the mastermind behind credit card? Here’s a little bit history on how credit cards are invented. A credit card is such a facility loved by every individual. It saves us during the time of financial crisis. The card is used and accepted all over the world. Let us study the background of credit cards.
In 1887 Edward Bellamy published a novel titled “Looking Backward” on this novel he mentioned the word “Credit Card” and it is reffered as the card where citizens spends dividend gained from the government rather than borrowing as what a credit card is today.
Early Created Cards – Charge Coins
A Credit card created almost due to a dream that creators wanted for convenience. In late 19 century Charge coins are like the credit cards of this era. LOL. I used era. Anyway, charge coins are like credit cards but it has different use. Charge coin is simply a tool to transact faster on these times. They have charge account numbers that they can imprint on sales clip and whosoever account number are those will be charged by the amount on the sales slip.
But they are a great risk of fraud since these charge coins do have have the names of the owner in it, making it like anyone can use it. Hence, modern created cards are created.
In the 1920s, it was found that a lot of industries have started using credit cards in the countries of the USA. From logistics to the hotel industry, every individual firm started to evident the beginning of a new era. However, credit cards were initially originated in Europe in 1890. With the help of this innovation today, the entire world is making use of this facility.
The Importance of Credit Cards Today
A credit card is a transaction card given by banks to the registered individuals. This card is similar to a debit card with extra functions and features. The main advantage of using a credit card over the debit card is the credit facility provided. When the available balance of an account holder becomes nil, a credit card gives the account holder the option to take the money on credit to an extent.
The account holder can purchase any desired product on credit. The Bank pays the amount or price of the product. Later the account holder has to pay back the credit amount to the Bank along with the interest amount. The interest rate on a credit card is set by the Bank depending upon different criteria. The account holder has to pay back the credit amount within a certain stipulated period stated by the Bank. If he fails to do so, the Bank has the complete right to take legal actions.
How does a credit card work?
A credit card is a transaction card provided by financial institutions such as banks. It is a rectangular-shaped plastic card with a magnetic strip on it. The card has various details printed on the backside of it. You will see the card number and CVV number printed on the body of the card. The holder of the card is given a separate pin that is the password to withdraw money based on the preferences. The transaction of the card is done through the signals sent by servers of the Bank.
Here’s an image explaining how a credit card transaction work
The process of the transaction begins when the card is inserted in the swiping machine. Every credit card has a black magnetic strip imprinted on it, which is used for the operation. When the card is inserted in the swiping machine, the swiping machine reads the magnetic strip to collect the account’s information such as names and the credit card number. Once the information is received based on the available balance, the transaction is made. If the balance is less, the Bank credits the amount of purchase.
After the transaction is complete, the Bank sends the credited amount details to the account holder. The features also include the interest rate payable to the institution. The tenure of the payment will also be specified to the account holder precisely. On receiving the details, the account holder is required to make the payment within the institution’s stipulated period.
And that my friends is a bit of a history of how credit cards are invented and how it evolve today!