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Knowing how credit cards evolved through time can help you understand the actual situation. If only we remembered how utility ruled the start of the plastic card as a financial product we would use them more wisely and we would focus on those products that provide a greater utility and those that serve the purpose for which they where created more efficiently.
The Beginning: Time and Scene
If we need to define a spot in time where credit cards predecessors appeared we would most certainly find it very difficult to reach an agreement because these cards are a result of the evolution of many different financial products. These products are bank accounts, personal loans, personal lines of credit, etc. Actually what makes this product unique is the fact that it can be used as a method of payment. But if one evaluates the nature of a credit card, the basis resemble a line of credit financially speaking. And lines of credit are the result of bank accounts and personal loans where the need for flexibility produced the transformation.
Yet, it is possible to define a time frame where the genesis of this special lines of credit took place. We are of course talking about the first part of the twentieth century, specifically the period of time before the crisis of 1929-1930. The appearing of charge cards (store cards) was undoubtedly the birth of the credit card rudiment. This occurred in the early 1900’s but it was not till 1920’s that charge cards became very popular and started to generate financial transformations that would lead ten to twenty years later to the birth of revolving cards.
Charge Cards – Store Cards
Many stores soon noticed that if they could provide certain time between the purchase of goods and the payment, they would increase revenues and obtain customer fidelity. That is what charge cards and store cards where all about at that time. There was no credit involved in a strict sense because the whole balance had to be paid by the end of the period. Nevertheless, a certain sense of debt was present since the balance remained unpaid till then and a relationship based on confidence was built that would later generate what we now know as credit history.
Revolving Credit – Seed Of Today Cards
Later on the 1930’s and reaching the 1940’s, revolving credit would revolutionize and transfigure the financial industry and the commerce leading to the modern concept of unsecured cards. Revolving credit implies the existence of a balance which may or may not have to be paid in full at the end of a period but in any case, it allows the buyer to keep purchasing items which would generate another balance. First, stores would let people use their charge cards to purchase products and repay them in three or more months but full repayment was required to make new purchases. Soon after, the full repayment of the balance was no longer required.
Credit Cards As We Know Them
In the early 1950’s the first cards appeared and soon many followed the trend. Stores issued their own credit plastics or store cards but national and regional credit companies also got the spotlight and between the late 1970’s and the beginning of the 1980’s many of the card brands that we know today had already been established.
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