A credit card (BC, BCard, Bank Card) is a plastic card that is tied to one or more accounts with banks. Used to pay for goods and services, including through the Internet, as well as cash withdrawal. Cards are debit and credit. Debit cards are used for the disposal of his own money, located in the current account in the bank. Credit cards are used for the disposal of the bank's money, that when making the payment automatically taken from the bank on credit (which is required to repay the bank.)
In this paper the history and cultural significance of the modern day credit card will be focused.
The History of Credit Card
According to G. Schneider, “The inventor of the first bank issued credit card was John Biggins of the Flatbush National Bank of Brooklyn in New York. In 1946, Biggins invented the "Charge-It" program between bank customers and local merchants. Merchants could deposit sales slips into the bank and the bank billed the customer who used the card.”
The very first universal credit card appeared in 1950 in the United States. And it was a card of Diners Club.
Credit cards issued by a specific store or oil company, were very popular in the first half of the XX century. They help companies to ensure customer loyalty, greater probability that the debtor will return to the store to buy something else on credit.
The buyer to make the purchase in several outlets, it was necessary to carry a large amount of credit card, that is a separate card for each outlet, which caused some inconvenience. In 1949, thanks to the stories, the legend had the idea to create a company intermediary between sellers and buyers, which produced a universal credit card, which would be taken in many retail outlets.
And the story is as follows. Three friends - the head of Hamilton Credit Corporation Frank McNamara, the grandson of the founder of shops Bloomigdale's Alfred Bloomingdale and lawyer Ralph Schneider - met to dine in the luxurious New York restaurant, Major's Cabin Grill (not far from the iconic Empire State Building). At the table, they say, as usual, about the business and, in particular, about one customer McNamara, who delayed the payment of the loan. When it came time to pay and expenses for business, Frank was horrified to find that he had left the wallet at home. As a result, financial tycoons, burning with shame, had to call home to his wife brought him the money.
This small, in fact, an oversight, according to witnesses, was the first significant impetus that made you wonder: how to make the payment of certain services more accessible? Can we do without the bulky stacks of bills?
In the same year, Frank McNamara and Co have created a new company, called Diners Club, and this event is the beginning of the history of the card industry. The new company was to lend to customers for a small percentage. Now, not every individual companies offered their own credit card, a Diners Club credit opened to customers at the same time for several companies. And the collection of money from debtors, credit card holders, conducted not the service companies, and McNamara and Co.
McNamara focused on the businessmen. They were the most frequent visitors to the restaurants and, therefore, it is their services might be interested Diners Club. Therefore, the first Diners Club cards handed out two hundred people, mostly friends and family of the owners. Cards were made in fourteen New York restaurants. They were printed on a rectangle of stiff paper with a list of all the 14 restaurants on the reverse side.
Using credit cards Diners Club, won the only company that received regular customers. In turn, the founders of Diners Club have decided that the company will pay the club to 7 % of each purchase made with the help of a universal credit card. In addition, cardholders are required to pay an annual club fee of $ 3 dollars.
At first, things did not go very well, because the restaurant owners do not want to pay a fixed 7% were afraid of competition and new cards with credit cards most establishments. Potential customers Diners Club did not want to buy a club card, as this means of payment they can use only a few outlets. However, by the end of 1950 20,000 New Yorkers paid for dinner restaurants pieces of paper from the Diners Club.
At the same time, a former friend of Alfred Bloomingdale McNamara began in Los Angeles own credit card transactions on a similar scheme, known as the "Dine & Sign" (" Finished - sign it "). He managed to attract more than 25 restaurants, and a monthly turnover of his company soon was now $ 150,000. However, he began to experience financial difficulties, not having sufficient credit facilities. In early 1951, former friends and future partners decide to team up, and a new system acquires national status, working in New York, Los Angeles and Boston. The combined company, and later called the Diners Club.
The company was growing rapidly, almost colliding with the competition. In 1952, the annual membership contribution was already $ 5. Cards are accepted in 400 restaurants, 30 hotels, 200, car rental agencies, and 5 flower shops.
International status Diners Club card is in 1953, and accepted in trade and service enterprises of Great Britain, Canada, Mexico, France and Cuba. Opened Diners Club franchise organization in the UK, Spain, Brazil and Australia. Began a new period in the history of the international club of Diners Club International.
In 1955, Diners Club shares are traded on the American Stock Exchange. The company Hertz begins to take Diners Club card in their car rental agencies, and in 1956, Diners Club Club releases gift certificates for the members of the club, which can be transferred to any person who will be counted a certain amount of money when you open the card. The acquisition of Trip-Charge, Inc (a card according to the calculations in the service centers), Diners Club has added 22,000 members.
In 1958, the IRS (Internal Revenue Service - a federal organization that collects tax on income) requires detailed reporting on all types of corporate spending, which leads to an increase in demand for cards Diners Club. Travel Agencies in New York, Chicago, Boston, Cleveland, Los Angeles and New Orleans are starting to take Diners Club cards as payment for tickets, tickets to the ship and cruise tours. In the same year, Diners Club offers insurance card holders in tourist trips and introduces the first program on the market for the guaranteed booking hotels.
In 1961, the annual fee for membership in the Diners Club increases to $ 8, stop the use of paper (cardboard) cards, which are replaced by plastic, signed a contract with the Dashew Business Machines to supply imprinters, of rental outlets.
The annual fee for membership in 1963, rising to $ 10.
In 1967, Diners Club actively penetrates to the tourism market by acquiring a third of turnover ($ 60 million), a travel company in the United States - Fugazy Travel. Currently, Diners Club accepted in 130 countries.
In 1975, Diners Club, the first with all payment systems, offers customers a corporate card, and in 1976 offers its customers the opportunity to obtain a loan of $ 15,000, as well as an extensive program for travel insurance, provided that a plane ticket or a train purchased on the map Diners Club.
Administration (General Services Administration) in 1983, elected official Diners Club credit card for federal employees, and in 1987 Diners Club card holders have access to a network of ATMs worldwide.
Since 1991, the start joint production of cards with airlines British Airways and Scandinavian Airline Systems. The World Bank (World Bank) takes all your bills on corporate cards to Diners Club in 1994.
The poll, which was conducted in 1998 by the International Association of the U.S. Office revealed that the creation of maps and settlement system, Diners Club Frank McNamara was one of the " 75 biggest decisions." It is no wonder that two years in a row (1998 - 1999 pp.) Diners Club awarded the prestigious prize Freddie Award as the best design / credit card for travelers.
With the development of the service network card Diners Club are increasingly introduced into the sphere of banking services, more precisely, the banks themselves were interested in the development of the Diners Club.
American Express is an American diversified corporation that provides services to individuals and legal entities in the markets of the international business and the private tourism, financial services and e-commerce. One of the first companies to set up a payment system based on plastic cards and the first company in the world - the issuer of traveler's checks.
The company American Express (AmEx) at the initial stage of its operation becomes known in 1850 as a reliable courier service (courier delivery in America) is engaged in transportation of goods and small money transfers between individuals, companies and banks. Since the roads to transport cash Wild West was dangerous (as it concerned courier stagecoaches and ordinary travelers), the U.S. government passed a law on postal money orders, which greatly reduced the revenue of courier services.
In 1891, the Company will issue the first travelers check American Express. The use of the check was quite original - check the accuracy was determined by comparing the two signatures. The first owner was put on the check at the time of purchase, the second - in the time of presenting it for payment. If the signatures are similar enough, check payment is guaranteed. Checks began to enjoy great popularity among the travelers as well as saving them from the need to carry cash. Reliability and ease of use of checks contributed to their spread in Europe. In addition, American Express network of offices grew rapidly and by the early twentieth- century America, and covered the whole of Western Europe.
The success of travelers checks (a large number of customers, the huge financial resources that allowed them to lend an extensive network of service) was a good basis to go to the credit card. Not to be outdone by a competitor (Diners Club), in 1958, American Express released the first personal cards. The company offers two types of cards - "purple" (purple) and "GOLD" (gold), the so-called elite card "EXECUTIVE CREDIT" (" Administrative Trust"). Maintenance of these cards cost $ 15 a year (at the time it was very expensive). For each of these cards is the owner get a full range of travel services.
A year later, in 1969, "American Express" radically changes the design of their cards, and to replace the "purple" comes the traditional "green" map "American Express" (the design of which has existed for almost 30 years, until the present time)
For our clients "American Express" released even special informational posters that were called: "Why we're changing your card from purple to green. Money green" ("Why do we change your American Express card from purple to green. Green Money. ")
In 1980, American Express has made every effort to become a financial super company. Management decided to create an investment bank. In mid-1981 it purchased Shearson Loeb Rhoades, the second largest securities firm in the United States to form Shearson / American Express. In 1994, American Express has been resettled from other investment banking and institutional businesses. Currently, the director is Harvey Golub, who led the CEO American Express in 2011
In 1958, Bank of America issued a blue- white-and- gold card BankAmericard. C increase in the national popularity of bank cards BankAmerica to support them was established a separate organization «BankAmericard Service Corporation», which focused all operations with cards «BankAmericard», and began selling licenses to issue cards to other banks. The latter should have been adhering to the standards and rules of your cards. Under the status it was an association whose members became banks.
In October 2007, as a separate legal entity established corporation Visa Inc., And Visa USA, Visa International, Visa Canada and Inovant become direct or indirect subsidiaries of the company. Visa Europe did not become a branch, and is owned and operated by European financial institutions - members of the association
The Popularity of Credit Cards. Pros and Cons.
Currently, credit cards have become a very popular means of payment. This is due to a number of benefits that it gives to its owners.
- Ease of bank cards - the universality of use. The card holder can carry a large amount.
- The loss of the card. In case of lost or stolen, the owner can call the bank processing center and disable operations with the card. The finder or stole the card will not be able to use it after the lock (from a few seconds up to several days), except in some rare cases. Owner will also be re-issued his card with saving the entire amount at the time of lock, less a small amount for the re-release.
- No problems with customs. Laws of many countries restrict or closely monitor the amount of the import / export funds. Bank cards also are not subject to customs accounting, respectively, with their help, you can carry any amount.
- Geography payments. Bank cards of international payment systems allow you to pay for goods and services in most countries of the world, as well as over the Internet. Currency card is constant, in the calculations the official rate of bank commission payment system.
- Promptness of payments. Cash receipt or payment of goods and services from ATMs or POS terminals takes place very quickly anywhere in the world.
- Deposit. The owner of a credit card can receive interest-free and rapid replenishment of the account, being in a different city or even country, while at the bank transfers, for a transfer via Western Union and other lost interest for the service.
- Trifle is required. There is no need to keep a little money (especially coins). Plus as for the card holder, and for the outlet.
But there are still some disadvantages of using Credit Cards:
- Accepting payments. In developed countries, almost all outlets accept bank cards in less developed - card acceptance is limited to large supermarkets. In some countries the presence POS retail necessarily, as a cash register.
- The problem tip. There is a particular problem when paying at restaurants, bars, etc, related to the complexity of obtaining tip when paying by credit card. There are specialized software POS- terminals, allowing data to service retail outlets, with the ability to specify the amount of the check in the tip, but usually tip paid in cash. This leads to the fact that in some countries pay cards bar impossible. Ironically, in Russia the problem is almost non-existent. In the U.S., there is virtually no restaurants and bars on the checks that did not have a separate line, in which the client enter the amount of a tip (though usually first through the terminal received payment of principal amount of the check, and then fit the tip, and then the waiter or bartender separately gaining this amount the terminal).
- Security. In the calculations on the Internet and getting cash from ATMs and pay for goods in doubtful points, there is a nonzero probability of becoming a victim of fraud using technical means. Partial way out of this situation is the use of smart cards. Therefore, you should be extremely careful when using a magnetic card, on a regular basis to prevent banks in their leaflets. But ! Chip cards reduce the likelihood of copying maps, but use a remote (via the Internet), with the data being compromised card, or cash withdrawals, recording PIN code directly to the card (for example), perhaps.
- Complexity of use. Although the issuing banks are trying to simplify as ATM interface, for many people, especially the elderly, there are notable difficulties in obtaining cash, and sometimes even in the calculations at the box terminals.
- High Commission for the stores for the chance to receive payments on the cards. Shop forced to lay the cost of acquiring in the cost of goods (about 2%), which is critical for stores operating in the discounter format.
- Traceability / traceability, it is both a virtue and a drawback. On the one hand, all purchases of an individual are completely transparent to the authorities, on the other hand facilitates preparation of various financial reports.
- Withdrawal limits - the maximum amount that the card holder is entitled to receive cash for a set period. Usually, the contract with the issuer or a one-time set daily limits.
- Foreign currency translation - The card holder can lose on the exchange of currencies.
Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 261. ISBN 0-13-063085-3.
Schneider, Gary (2010). Electronic Commerce. Cambridge: Course Technology. p. 497. ISBN 0-538-46924-2.
Paul O'Neill, "A Little Gift from Your Friendly Banker", LIFE, April 27, 1970
Gensler, Lauren (April 2013), "You (Probably) Won't Pay More to Swipe", Money (magazine) (paper) (New York): 14