Credit card

Creditcardwcontactless

CCardBack

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Mastercharge and Bankamericard

Credit card receipt - old style

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Credit card logos (2015-12-1816-27-350044)

Credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for the amounts plus the other agreed charges. The card issuer (usually a bank) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance.

A credit card is different from a charge card, which requires the balance to be repaid in full each month. In contrast, credit cards allow the consumers to build a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Credit cards have a printed or embossed bank card number complying with the ISO/IEC 7812 numbering standard. The card number's prefix, called the Bank Identification Number (known in the industry as a BIN), is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs.

History

The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel, although this referred to a card for spending a citizen's dividend from the government, rather than borrowing. The modern credit card was the brainchild of John Biggins of the Flatbush National Bank of Brooklyn in New York, who in 1946 launched the Charge-It program between bank customers and local merchants. The concept of paying the merchant using the customer's credit was later adopted by banks in the United States and the United Kingdom.

Types of Credit Cards

Credit cards can be categorized in several ways, including by their primary features or by the payment network they operate on, such as Visa, MasterCard, American Express, or Discover Card. Common types include:

- Standard Credit Cards: Basic cards that offer no special features beyond extending credit to the cardholder. - Rewards Credit Cards: Cards that offer rewards for spending, including cash back, points, or airline miles. - Secured Credit Cards: Designed for individuals with no credit or poor credit, these require a security deposit that typically also serves as the credit limit. - Charge Cards: Require the balance to be paid in full each month, but may not have a preset spending limit. - Business Credit Cards: Tailored for business use, with features and rewards designed to benefit businesses.

Usage

Credit cards are a widely used form of payment for both physical and online transactions. They offer convenience, security, and the ability to make purchases on credit. When a transaction is made, the credit card user agrees to pay the card issuer. The cardholder indicates their consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN). Also, many credit cards offer fraud protection and secure online shopping, making them a preferred payment method for many consumers.

Benefits and Risks

While credit cards offer significant benefits, including convenience, rewards, and building a credit history, they also come with risks. The most notable risk is the potential for accumulating debt. Interest and fees can compound, making it difficult for consumers to pay off their balance. Additionally, irresponsible use of credit cards can lead to negative impacts on one's credit score.

Regulation

Credit card issuers are subject to various regulations, including those that limit interest rates and fees, mandate clear disclosure of terms, and protect consumers from fraud. In the United States, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) is a significant regulatory statute that aims to protect consumers.