The History of Credit Cards

According to Encyclopedia Britannica, “the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers.” However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant’s customer. Around 1938, companies started to accept each other’s cards. Today, credit cards allow you to make purchases with countless third parties. [ link ]

So by this point, you’re probably thinking to yourself – This seems like quite the ingenious little invention. Not quite, you see unfortunately as human beings we have never been able to understand the concept of moderation and self-control. Time and time again we will make purchases on these devilish little cards emphasizing our endless greed for more, more, MORE!

Some general statistics within America

• American’s owe $850 billion in credit card debt. Take into consideration that the world’s 54 poorest countries owe $412 billion in foreign debt.

• 60% of American’s have been in credit card debt for more than a year, and the average household owes upwards of $9,659 on its credit cards.

• If you owed that much on a card with a 14% APR (the average interest rate) and made 2% monthly payments, it would take you more than 6 years to pay off—and you’d pay $4,922 in interest!

Whilst a borrower with good credit can get a best-buy unsecured loan for 7.9%, the rate of APR on credit card debt is considerably higher.  According to CreditAction.org, the average rate of APR charged on credit card balances is 17.42%, which is over 120% higher than on personal loans.

Statistics produced by uSwitch.com show that 7.3 million consumers use credit cards to take cash advances. The cumulative amount of cash advance withdrawals amounts to a colossal £3.7 billion per annum. They estimate that over one million people are using cash advances to cover mortgage and loan and payments. They also believe that in excess of 700,000 people are withdrawing cash from one credit card to meet financial commitments on another.

How a credit card makes money

A lot of people think that in a recession credit card companies will not make money – This is because people do not pay off the full amounts in time. Wrong! Credit card companies make money through the discount charges they charge merchants who accept credit cards (a percentage of each sale), interest charges when you carry a balance, late-payment fees, and sometimes annual fees. Therefore regardless of economic conditions, these puppies will continue to profit as soon as you make a small payment, just take a look at VISA and MasterCard’s stock quotes. They are just as vibrant as ever!

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So in the end, investing your money within a credit cards stock can be a smart thing, however do not confuse it with overusing what’s in your wallet!