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The History of Credit Cards
The concept of the credit card has been around since the late 1800’s when coins and plates were used to charge accounts as a modern day ‘tab’. Credit cards began to emerge in the early 1900’s as proprietary cards and were issued to the oil companies and department stores as a way to improve their customer service. In the 1960’s, these cards were soon replaced with plastic and were coined the term ‘charge card’, and the bill had to be paid in full at the end of the month. American Express was the competitor for the U.S. Postal Service, money orders and traveler’s checks as they specialized in many of the same deliveries. By 1987, American Express issued credit cards that allowed its users to pay a monthly fee with no annual fees, low introductory rates and reward programs. It wasn’t long after that other credit card companies joined in and began to sprout across the nation.
So now that you’re interested in obtaining a credit card, there are quite a few terms that you may not understand. One of the most misunderstood is the annual percentage rate (APR). This is your interest rate for an entire year, not a monthly fee; this number can be anywhere from 0-23% depending on your credit and the credit card company. Another common misunderstood term is interest. Interestingly enough, this is not for your benefit; interest is how the credit card issuer gains revenue from you over time. The more money you borrow from the credit card company, the more interest you pay the issuer for their personal profit. Cash advance fees are another way for credit card companies to reel you in. These should be avoided at all costs as the interest rate on these are usually very high, but should you need to use this feature, make sure to pay the amount back as soon as possible to prevent an expensive credit card bill.
Well, so far, credit cards are sounding like the best thing to have and are easy to maintain, but there can be a downside and you can get in trouble with them. There are several things you should do to prevent this problem. First, make sure you get your payment in before the due date; should you miss this date, not only will you have your interest rate to pay, but you are also charged a late fee ($20-$50) and you could eventually be given a higher interest rate that will eventually make your bill too much to handle. Cash advances also add up; many people don’t realize they pay extra interest on cash advances, so the credit card company makes sure they get their percent on the next bill. Sound easy enough? Well, here are some simple things that get SEVERAL people into credit card debt each year. If you need to use a credit card to pay for simple everyday things, you’re already in financial trouble and should not attempt to get one. Transferring balances and skipping one bill to pay another bill is another great example of how not to use a credit card. Frequent transfers and missed payments are a red flag to the credit card company and they will take advantage of the situation. Credit cards should not be used to charge more than you can pay. That big screen tv or vacation to paradise may be tempting, but if you can’t afford it now, you can’t afford the interest that will build up for the next bill. A maxed out credit card will get you nowhere but a trip to meet with the IRS and bankruptcy staff.
