The plastic card which is issued by the bank to the users as a system of payment is referred to as credit card. Goods and services can be bought with the help of the card by it holder depending on the promise of the holder to pay the money back for the goods bought and the service utilized. There is a revolving account generated by the issuer of the card granting a line of credit to the user where the user will borrow money for the payment that is made to a merchant or a cash advance to the user.
Credit card Vs Charge card:
There are number of differences between the credit card and the charge card. The basic difference is that a charge card is in need of the balance to be paid back in full every month while the credit card allows the balance of the debt to be the held by the customer for a longer period by just changing the interest rate that is being charged.
On the other hand, the credit card also differs in certain aspects from the cash card in the way that the cash card can be used by the owner of the card like a currency by the user of the card. Usually the credit cards are either issued by the banks or the credit unions, but the size and the shape of the credit cards are specified by the ISO/IEC 7810.
Edward Bellamy is the one who described the concept of using the credit card. This concept has been described in the year 1887 in the novel “Looking Backward” written by Edward Bellamy. In this novel the term credit card has been used about eleven times. The merchant credit schemes have been the basic for the modern credit card. For the first time, it was used in the United States of America in the year 1920 in order to sell the fuel for the increasing automobile owners. There are several companies which started accepting the credit cards in 1938. The charge cards have been issued by the Western Union from 1921 for the frequent customer who had regular transactions.
How it works:
It is also important to know how the credit cards work. After the credit provider approves the account of an individual the credit cards are issued by the issuer of the credit card. The card issuer promises to pay the merchant while purchasing an item by swiping an electronic card and the merchants accept this deal.