Credit cards sure have come a long way. When first introduced, many people laughed at the prospect and scoffed at what they called “fake money”. Little did they know what an overpowering industry the credit card one would become. Nor could they know what a burden credit card debt would be to millions of Americans. Here is how it all began.
How Did Credit Cards Begin?
In 1951, a company called Diners Club existed to cater to the wealthy who liked to dine at exclusive four and five star restaurants. Since the members of the Diners Club were so rich and reliable, the idea was created to allow them to use a buy now pay later card. The card was given to 200 members and it could only be used at 27 exclusive restaurants in New York City. This was not so much a credit card as a charge card since the balance had to be paid in full every month.
These cards did not resemble the credit cards of today. They were made from cardboard and were not standardized. It was American Express that decided a card made of plastic would be easier to handle and it would not need to be replaced as frequently as cardboard cards. So in 1958 American Express released the first plastic credit card. It was a purple card that could be used for travel expenses and entertainment only and was generally used by the wealthy.
One year later American Express introduced the idea of carrying a balance and finance charges. This meant that card carriers did not have to pay off their balance every month. It also meant that the credit card companies could make more money off of finance charges. So in 1959 revolving credit was born.
Within five years, there were over 1 million cards in circulation and American Express expanded its card use to overseas. This meant that over 85,000 businesses worldwide now accepted American Express as payment for services. American Express quickly became a multi-million dollar company. They did not and have never out sourced their transactions so all transaction fees go to the company.
Where is the Credit Card Now?
It is hard to remember a time without credit cards and for many, a time without credit card debt. A survey shows that 78% of Americans have a least one credit card. That’s over 90 million homes with credit cards and the average person has 5 credit cards. Though American Express started the credit card craze, it is now behind Visa and MasterCard as the third highest used credit card in the nation.
With the introduction of debit cards, the credit card industry has made cash a last option for many Americans and check usage has dropped consistently every year for the last 10 years. Visa alone ran $1 trillion in transactions last year. The scary part of this is that American credit card debt has reached over $972 billion dollars.
Credit card spending is out of control in the United States. Instead of being an option to manage your money as was the point of its introduction, it is now a way of paying for everything. The average credit card in American has a balance of $10,679 and 58% of credit card holders carry a balance every month. These facts have resulted in huge financial burdens for Americans.
How can Credit be Handled Responsibly?
American need to start handling their credit cards responsibly. The first step is to pay off existing debt. This may mean going without things you want for a while or cutting back on some extras. While paying off debt, do not use your credit cards. If you are already paying off your debt every month, continue to do so. And always make your minimum monthly payment on time.
One way credit card debt gets out of control is because of the cycle created by the credit card companies. One late payment can result in an increase interest rate which can in turn skyrocket your monthly payment. If you can’t meet this amount, your credit cards go into default. You must use your credit wisely and pay your cards on time.
If you are looking for a card that gives you’re the right payment options, interest rate, and features that will help you use your credit wisely, compare. Our free credit card chaser tool will show you different cards side by side so you can choose the one that has the right features for your lifestyle. Get started finding the best credit cards today!
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