The Evolution Of Credit Cards

 

A bank or financial services organization will issue a thin, rectangular piece of metal or plastic called a credit card, which allows its holders to borrow money to pay for products and services from businesses that accept credit cards. Credit card users must repay the amount borrowed, plus any relevant interest, together with any additional costs agreed upon, in full by the billing date or gradually over time.

Modern Credit Cards

The first contemporary credit card was released in 1950, following in the footsteps of charge coins, metal money, the Air Travel Card, and the Charg-It Card. The industry grew during the ensuing several decades with the introduction of more prominent credit cards. Here are a few of the innovators.

1. Diners Club Card:

Coincidentally, businessman Frank McNamara misplaced his wallet while going to dinner, creating the first credit card in history. A year later, McNamara returned with a small cardboard card that was the original Diners Club card, while his wife helped him out. The initial general-purpose charge card was the Diners Club card. 

Cardholders could pay their payments in full each month at a later time and use their card at hundreds of eateries, lodging facilities, and rental vehicle companies. The service would cost $5 a year for users, while retailers would pay a 7% tax on sales.

2. American Express Cards:

In 1958, American Express, a company that had been around for over a century, released its first credit card. The merchant had to mail the corporation handwritten forms for the first transaction to be processed. The business started producing embossed plastic cards a few years later.

3. BankAmericard:

The first consumer credit card that permitted monthly balance rotation was introduced by Bank of America in 1958 under the name BankAmericard. After being separated from the national bank, the BankAmericard brand was rebranded as Visa in 1976.

4. Master Charge Card:

A consortium of financial institutions established the Interbank Card Association in 1966, launching a credit card known as the Master Charge. After finally absorbing the Everything Card from First National City Bank, which is now Citibank, the business eventually changed its name to Mastercard in 1979.

5. Discover Card:

With the help of a Super Bowl commercial, Sears, Roebuck & Co. introduced the Discover Card in 1986. Among the earliest cash-back reward schemes was provided by the card. In 1993, Discover became its own independent business.

The Evolution of Credit Card Technology

1. Magnetic stripes: 

For many years to come, magnetic stripes with card information that was encoded were the norm, having been developed in the 1960s. However, card issuers are beginning to phase out the usage of magnetic stripes due to the emergence of more secure technology.

2. Card verification value (CVV) codes:

Three- or four-digit numbers known as CVVs are written on credit cards and serve as an additional layer of security for transactions that don't involve the card, including online purchases. CVV codes were originally added to credit cards by Mastercard in 1997. Over the next few years, other payment processing networks adopted similar features.

3. EMV chips:

The payment processing network and a merchant's credit card terminal can authenticate each other in an encrypted manner thanks to embedded EMV smart chips. One-time-use tokens that identity thieves cannot exploit are another feature of the technology. Following its initial development in the 1990s, EMV technology quickly gained widespread acceptance throughout Europe.

4. Near-field communication: 

NFC, or near-field communication, is a technology that enables wireless communication between two devices when they are near one another using radio waves. Data sent by NFC is encrypted to guard against fraud, much like it is with EMV chips. Contactless credit cards with a tap-to-pay function and digital wallets like Apple Pay and Google Pay both employ this technology.

Types Of Credit Cards

• Credit cards with rewards

• Credit cards with cash back

•  Credit cards for travel

•  high-end reward cards

• Credit cards for businesses

• Credit cards for students

• 0% APR initial credit cards

• credit cards that are secured

•  Credit cards with joint branding

• Credit cards for airlines

• Credit cards for hotels

• Keep credit cards in-store

The First Credit Card In India

The credit card industry did not take off until Andhra Bank introduced its credit card, despite City Bank having created the Diner's Club card in 1969. The Central Card was introduced in 1985 by Vysya Bank, the United Bank of India, and the Central Bank of India. That same year, the Bob card was jointly introduced by Allahabad Bank and Bank of Baroda. 

ANZ Grindlays Bank launched the Visa Classic Card in 1989. Since then, the number of credit cards in India has grown at a compound annual growth rate of 25–30%. Based on estimates from the RBI, there were 28.8 million credit cards in use in India as of January 2017. Nevertheless, India currently has 661.8

Credit Card Benefits

Here are a few benefits of credit cards:

1. Flexibility To Finance Purchases

One of the primary uses of credit cards is for purchases that are made but not paid for right away. Using a credit card, you can charge products up to the credit limit at least once a month. Most credit cards allow for monthly balance transfers. 

2. Protection Against Fraud

Credit cards are considered to be among the safer payment methods due to the fraud protection that they offer. You won't be responsible for any fraudulent purchases if the card is lost or stolen because most credit cards don't cover unauthorized payments.

3. Quick Acceptance Of Loans

Credit cards can be used to obtain bank loans. After that, your bank will pay the amount from your credit limit and deposit the money into your bank account. In a matter of seconds when the loan is approved, the requested amount will be deposited into your bank account.

4. Get Rewards

Benefits must be mentioned when discussing the advantages of credit cards. In several situations, using a credit card can be advantageous. Store cards, co-branded travel and hotel rewards cards, cashback cards, and reward travel cards are just a few of the numerous credit card types that offer benefits.

5. Expense Log

Every purchase you make with a credit card is documented. Your credit card statement has all of this information available. Keeping accurate records of all the purchases you make with your credit card will help you better manage your money and set up a monthly budget.

 Disadvantages of  Credit Card

1. The Credit Card Balance Is Visible

While having debt isn't inherently bad, if you have too much credit card debt, you should put the cards away until you have the funds to pay them off. It is easier for balances to build up on credit cards since they often have higher interest rates than other loans—especially if you only make the minimum payments each month.

2. Overspending

Because credit cards give you credit in large quantities, you might occasionally use the available balance to make risky purchases and subsequently find yourself in debt.

3. Solution

To prevent overspending, you should never use a credit card that is more than 50% to 60% of its credit limit. By ensuring this and closely monitoring your unnecessary expenditures
, you can avoid going overboard and, consequently, avoid incurring debt.

4. Excessive Fees

If you pay a certain amount with a credit card, you may be assessed a surcharge, which is an extra cost. However, this fee usually includes train reservations and fuel.

5. Resolution

Some credit cards, such as the gas credit card, do not impose additional fees for fuel. In most cases, if the transaction value falls within a specific range, the bank will not impose the extra. The monthly fee waiver amount may also be capped.

Credit Card Eligibility Criteria Factors

1. Age: 

You must be 18 years old. Certain banks have a minimum age requirement of 21, while others have a maximum age requirement of 60 years old. 

2. Annual Salary: 

The cards you are eligible for are determined by your annual income. 

3. CIBIL: 

Should your credit score be too low, your credit card request will be denied. Checking your credit score, building your credit profile, and being aware of your credit status are all recommended before applying for a credit card. If your score is poor, this is how you can raise it before applying. A credit score often falls between 300 and 900.

4. Credit Enquiries: 

The bank initiates a "hard inquiry" when you apply for a loan or credit card, requesting your credit report from the credit bureau. Your credit score may drop if you make multiple hard inquiries in a short amount of time. Try to refrain from making a lot of hard queries while applying for a credit card and think about your options instead. It is recommended that you give it at least six months before reapplying for a loan or credit card.

Conclusion

When handled with caution, credit cards could be a useful tool for managing expenses. In addition to excellent shopping experiences, they offer financial independence and medical support. If all the conditions are met and the necessary documentation is provided, anyone can apply for a credit card; nevertheless, they should be cautious of their credit score.