TOPIC: CREDIT CARD

Credit cards and charge cards, what is the difference?

A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them.

• The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

• A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged.

• A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.

HistoryThe concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel, although this referred to a card for spending a citizen's dividend rather than borrowing.

• The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards. Western Union had begun issuing charge cards to its frequent customers in 1921. Some charge cards were printed on paper card stock, but were easily counterfeited.

• The Charga-Plate, developed in 1928, was an early predecessor to the credit card and used in the U.S. from the 1930s to the late 1950s. It was a 2½ in × 1¼ in rectangle of sheet metal related to Addressograph and military dog tag systems. It was embossed with the customer's name, city and state. It held a small paper card for a signature.

• In 1934, American Airlines and the Air Transport Association simplified the process even more with the advent of the Air Travel Card. They created a numbering scheme that identified the issuer of card as well as the customer account.

• This is the reason the modern UATP cards still start with the number 1. With an Air Travel Card, passengers could «buy now, and pay later" for a ticket against their credit and receive a fifteen percent discount at any of the accepting airlines.

• The concept of customers paying different merchants using the same card was expanded in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card, and required the entire bill to be paid with each statement.

• That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that acquired credit card features after BankAmericard demonstrated the feasibility of the concept).

In September 1958, Bank of America launched the BankAmericard in Fresno, California. BankAmericard became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned), and with its overseas affiliates, eventually evolved into the Visa system.

• In 1966, the ancestor of MasterCard was born when a group of banks established Master Charge to compete with BankAmericard; it received a significant boost when Citibank merged its proprietary Everything Card (launched in 1967) into Master Charge in 1969.

Nowadays Credit cards are the most popular form of credit today. Accounts for these cards are set up by banks, oil companies, retail stores, or by businesses that specialize in extending credit for special purposes such as travel and entertainment.

MasterCard and VISA are two of the best known. There usually is an annual fee that must be paid for the privilege of using the card.

A special card, showing the person’s name and account number and a place for the person’s signature, is issued to identify the customer as one having a charge account. These charge cards have become very popular.

• Bank charge cards are issued to people whose credit ratings meet the bank’s standards. A bank charge card, in effect, indicates that the credit rating of the cardholder is good. Agreements are made between banks and various merchants to accept the charge cards. The bank charges your account for your charge purchases and gives you a bill once a month for all the purchases you made.

• Customers like bank charge cards because they are accepted by many businesses in many foreign countries. Credit cards also become popular in Ukraine nowadays. Bank charge card users like the fact that they receive only one monthly bill rather than many from various businesses where they charge purchases.

• The main disadvantage to bank charge cards is that consumers often find it too easy to use their “plastic” money and may find themselves buying more than they can afford.

The necessary details on the credit card

Of the front in a typical credit card:1. Issuing bank logo2. EMV chip on "smart

cards" (electromagnetic vulnerability)

3. Hologram4. Credit card

numberCard brand logo

5. Expiration Date6. Card Holder Name7. Contactless chip

"Smart card" credit card with embedded microchip.

Of the reverse side of a typical credit card:1. Magnetic Stripe2. Signature Strip3. Card Security Code