A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. 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. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm
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" × 1¼" 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 recording a purchase, the plate was laid into a recess in the imprinter, with a paper "charge slip" positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter pressing an inked ribbon against the charge slip. Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates were issued by largescale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user made a purchase, a clerk retrieved the plate from the store's files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers. However, until 1958, no one had been able to create a working revolving credit financial instrument issued by a third-party bank that was generally
but not before 100 million credit cards had been dropped into the U. In 1966. a process President Johnson‟s Special Assistant Betty Furness found very like „giving sugar to diabetics‟. 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 Early credit cards in the U.S. and with its overseas affiliates.CREDIT CARDS
accepted by a large number of merchants (as opposed to merchant-issued revolving cards accepted by only a few merchants). narcotics addicts and to compulsive debtors. the bank is jointly liable with the merchant for purchases of defective products over £100. In the UK for example. a credit card transaction is often more secure than other forms of payment. and were outlawed in 1970 due to the financial chaos they caused. regardless of whether the
. only credit card applications could be sent unsolicited in mass mailings. Bank of America launched theBankAmericard in Fresno.
Benefit to Merchants
For merchants. of which BankAmericard was the most prominent example. a credit card allows small short-term loans to be quickly made to a customer who need not calculate a balance remaining before every transaction. After 1970. Compared to debit cards and cheques.
Benefits to customers
The main benefit to each customer is convenience. eventually evolved into the Visa system. products. BankAmericard became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned).” These mass mailings were known as "drops" in banking terminology. or airline tickets. population. free loss/damage coverage on new purchases. such as cheques. California. and points which may be redeemed for cash. provided the total charges do not exceed the maximum credit line for the card. because the issuing bank commits to pay the merchant the moment the transaction is authorized. drunks. In September 1958.S. such as offering enhanced product warranties at no cost. But. Credit cards also provide more fraud protection than debit cards. “They have been mailed off to unemployables.. A dozen experiments by small American banks had been attempted (and had failed). were mass produced and mass mailed unsolicited to bank customers who were thought to be good credit risks. Many credit cards offer rewards and benefits packages.
will instead have to show their passport. cards are even more secure than cash. a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Extra turnover is generated by the fact that the customer can purchase goods and/or services immediately and is less inhibited by the amount of cash in his or her pocket and the immediate state of his or her bank balance. Credit cards can also aid in securing a sale. American Express and Discover were previously the only card-issuing banks for their respective brands. especially if the customer does not have enough cash on his or her person or checking account. banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder.CREDIT CARDS
consumer defaults on the credit card payment (except for legitimate disputes. the consumer. and the passport number will be written down on the receipt. Prior to credit cards. The commission is often a percentage of the transaction amount. Much of merchants' marketing is based on this immediacy. In most cases. Cards issued by banks to cardholders in a different country are known as offshore credit cards. Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs. the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. In some countries. and can result in charges back to the merchant). which are discussed below. That task is now performed by the banks which assume the credit risk. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. Some shops use the card's PIN for identification. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. for example the Nordic countries.
. Non-Nordic citizens. For each purchase. In addition. who are unlikely to possess a Nordic ID card or driving license. In these countries merchants therefore usually ask for ID. sometimes together with other information.
Cardholder: The holder of the card used to make a purchase. and in that case showing an ID card is not necessary. plus a fixed fee (interchange rate). each merchant had to evaluate each customer's credit history before extending credit. because they discourage theft by the merchant's employees and reduce the amount of cash on the premises. but as of 2007. this is no longer the case.
Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution. professional organizations. universities. and major retailers. and one company may operate multiple networks. May be operated by an independent company. card-issuing banks. Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Merchant account: This could refer to the acquiring bank or the independent sales organization. but in general is the organization that the merchant deals with. etc. Examples of typical affinity partners are sports teams.
. and get paid a fee or a percentage of the balance for each card issued using their name.CREDIT CARDS
Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant. MasterCard. Transaction network: The system that implements the mechanics of the electronic transactions. that set transaction terms for merchants. Credit Card association: An association of card-issuing banks such as Discover. Visa. charities. and acquiring banks. American Express.
California. Our business primarily consists of the following: We provide processing services to our financial institution clients through Visa Net. Visa provides financial institutions with Visa-branded payment products that they then use to offer credit.
Visa Inc. rather. businesses. pay now with debit or later with credit products. extend credit or set rates and fees for consumers.9 million ATMs in more than 200 countries and territories worldwide. risk management services and information services. which provides the assurance of acceptance at tens of millions of merchants and 1. prepaid and cash-access
EXAMPLE OF CREDIT CARDS: VISA INC. Visa‟s innovations enable its financial institution clients to offer consumers more choices: pay ahead of time with prepaid. is a global payments technology company that connects consumers. Visa does not issue cards. prepaid and cash-access programs to their customers (individuals. Visa Inc. It facilitates electronic funds transfers throughout the world. most commonly through Visa-branded credit card and debit cards. debit.
Visa Inc. although much of the company's staff is based in Foster City. We continually look at how we can use our network breadth and payment expertise to extend the value of electronic payments so that more people can use Visa in more ways and in more places around the world. financial institutions and governments in more than 200 countries and territories. which our financial institution clients use to offer credit. California. We own and manage the Visa brand. Visa does not issue cards. derives revenue primarily from fees paid by our financial institution clients based on payments volume. businesses and government entities). a centralized and modular payments network providing three essential functions in one complete. Financial District in San Francisco. flexible package: transaction processing services. We offer a diverse range of branded payment products. debit. United States. enabling them to use digital currency instead of cash and checks. extend credit or set rates and fees for consumers. is an American multinational financial services corporation headquartered on595 Market Street. Consumer relationships belong to our network of financial institution clients and are managed by them. transactions that we process and other related services we provide.
's trademarks and technology in the European region. and relative isolation. There were already charge cards like Diners Club (which had to be paid in full at the end of each billing cycle). BofA was dropping cards in Los Angeles. The 1958 test at first went smoothly.
In mid-September 1958. Williams and his team studied these failures carefully and believed they could avoid replicating those banks' mistakes. BofA's market share of that population (45%). and its leader. to control public relations damage in case the project failed. the entire state had been saturated with over 2 million credit cards. by June. BofA's home market. but then BofA panicked when it confirmed rumors that another bank was about to initiate its own drop in San Francisco. North America. Visa held a 38. The need for a unified financial instrument was already palpably obvious to the American financial services industry. with an initial mailing of 60. California. Joseph P.000 (big enough to make a credit card work. and
. Williams. actual working cards. by October. Williams' accomplishment was in the successful implementation of the allpurpose credit card. issuing cards such as Visa Debit. In 2008. they also studied existing revolving credit operations at Sears and Mobil Oil to learn why they were successful. Visa Europe is a separate membership entity that is an exclusive licensee of Visa Inc. who convinced senior BofA executives in 1956 to let him pursue what became the world's first successful credit card "drop. Visa has operations across Asia-Pacific.4 trillion. Central and Eastern Europe." or mass mailing of unsolicited credit cards (that is." However. not in coming up with the idea.CREDIT CARDS
programs to their customers.7% of the debit card marketplace in the United States. Visa‟s global network (known as Visa Net) processed 62 billion transactions with a total volume of $4. according to The Nilson Report. not mere applications) to a large population. Africa and Middle East. By the mid-1950s. these prior attempts had been carried out by small banks which lacked the resources to make them work. which was clearly inefficient and inconvenient due to the need to carry so many cards and pay so many separate bills each month. the Customer Services Research Group. The original idea was the brainchild of BofA's inhouse product development think tank. small enough to control initial startup cost). the typical middle-class American already maintained revolving credit accounts with several different merchants. Central and South America. By March 1959.000 unsolicited credit cards. there had been at least a dozen attempts to create an all-purpose credit card. Caribbean. Bank of America (BofA) launched its pioneering BankAmericard credit card program in Fresno. In 2009.3% market share of the credit card marketplace and 60. Fresno was selected for its population of 250. drops began in San Francisco and Sacramento. but no one could figure out how to do it. and "by the mid-1950s.
BofA officially lost over $8. Barclaycard. however in many countries. IBANCO. Carte Bleue.
In 1970. and he resigned in December 1959. In 1974. Both politicians and journalists joined the general uproar against Bank of America and its newfangled credit card. which retained the distinctive blue. However. Chargex. licenses had been granted in 15 countries. Acquiring banks are responsible for ensuring that their merchants comply with the rules. there was still reluctance to issue a card associated with Bank of America. Rules address how a cardholder must be identified for security. Twenty-two percent of accounts were delinquent. the bank's actual loss was probably around $20 million. Other rules govern what creates an enforceable proof of authorization by the cardholder.8 million on the launch of BankAmericard. a multinational member corporation. The various BankAmericard issuer banks took control of the program. (NBI). especially when it was pointed out that the cardholder agreement held customers liable for all charges.CREDIT CARDS
BankAmericard was being accepted by 20. the program was riddled with problems. an independent non-stock corporation which would be in charge of managing. in 1975 BankAmericard. creating National BankAmericard Inc. the directors of IBANCO determined that bringing the various international networks together into a single network with a single name internationally would be in the best interests of the corporation. even though the association was entirely nominal in nature. white and gold flag.000 merchants. as Williams (who had never worked in a bank's loan department) had been too earnest and trusting in his belief in the basic goodness of the bank's customers.
. By 1972. how transactions may be denied by the bank and how banks may cooperate for fraud prevention. promoting and developing the BankAmericard system within the United States. and police departments around the state were confronted by numerous incidents of the brand new crime of credit card fraud. and all other licensees united under the new name. Bank of America gave up control of the BankAmericard program. although Bank of America continued to issue and support the international licenses themselves. even those resulting from fraud. For this reason. NBI became Visa USA and IBANCO became Visa International. but when the full cost of advertising and overhead was included. not the 4% expected. was founded in order to manage the international BankAmericard program In 1976.
Visa has a set of rules that govern the participation of financial institutions in its payment system. and how to keep that identification and fraud protection standard and nondiscriminatory. "Visa".
states. Massachusetts. Recent complications include the addition of exceptions for non-signed purchases by telephone or on the Internet. Florida. Maine.S. New York. As long as the Visa card is signed.
. and an additional security system called "Verified by Visa" for purchases on the Internet. The Dodd-Frank Act allows U. not to exceed $10. most notably the UK and Australia and retailers in those countries may apply surcharges to any credit-card transaction. Connecticut. Some countries have banned the no-surcharge rule. Visa or otherwise. although the merchant rule book states that this practice is "discouraged". Kansas. Visa does permit merchants to ask for photo ID. Colorado. surcharges for the use of a credit card are forbidden by law (California. In ten U.S. Oklahoma and Texas) but a discount for cash is permitted under specific rules. Unlike MasterCard.CREDIT CARDS
The rules prohibit merchants from imposing a minimum or maximum purchase amount in order to accept a Visa card and from charging cardholders a fee for using a Visa card. a merchant may not deny a transaction because a cardholder refuses to show a photo ID. merchants to set a minimum purchase amount on credit card transactions.