What Exactly Are Credit Cards, and Where Did They Come From? - Finance - Credit

Credit cards provide you with the ability to purchase items without providing the merchant with any cash or payment of their own. The credit card company makes the payment at the time of purchase. They then send the cardholder a monthly statement that includes all purchases made each month. Besides the convenience of not having to carry cash, you can also use credit cards to reserve hotel rooms and make hire cars.

Credit cards evolved from:

store credit accounts

store charge cards that were only good for each store

bank charge cards that were only good for whichever merchants agreed to do business with that bank

charge cards with global merchant acceptance (MasterCard, VISA, American Express, and Discover Card)

It's easy to get a credit card too; all you do is apply through your bank or a company that issues them. However it must be noted that a person's credit score will determine whether he or she qualifies for a credit card. The credit score also decides what the interest rate will be for unpaid balances. Banks offer the best credit card deals to consumers with superior credit scores.

Some credit cards require annual fees, but all credit cards will only charge interest for any unpaid balances after a month's time. Some stores will not accept credit card payments; this is because merchants have to pay transaction fees for every credit card payment taken. However a new Iphone app, allows anyone anywhere to accept credit card payments through a quick and easy swipe on a dongle. As long as you have wifi, you can take card payments, so maybe there will be no excuse in future for stores to not accept credit cards?

Here are the different types of cards available:

Debit cards are cards that automatically withdraw funds from a person's bank account to pay for the purchase.

Check cards are cards that look like credit cards to the merchant. They act, however, like debit cards in practice. Since debit cards are not as universally accepted as credit cards, check cards give consumers more opportunity to make purchases using a debit like system.

Charge cards are like credit cards in that when presented, the merchant accepts the card in lieu of money from the consumer. The difference between credit cards and charge cards is that charge cards often require the account owner to pay up any new charges every month. The cardholder could still have a sort of revolving credit scenario (charge this month, pay next month and charge next month, pay the following month and charge again). They cannot keep any unpaid balance on the account from month to month.

Prepaid cards are used like credit cards but they operate like gift cards. They have a limited amount of money associated with them. Prepaid cards are generally not "smart" cards but have identification strips that tie to information stored about that card in the card company's database.