CREDIT CARD

small card containing a means of identification, such as a signature or picture, that authorizes the person named on it to charge goods or services to his account, on which he is billed periodically. 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 for purchases made at company outlets; their use increased greatly after World War II. The first universal credit card, which could be used at a variety of establishments, was introduced by the Diners' Club, Inc., in 1950. Under this system, the credit-card company charges its cardholders an annual fee and bills them on a monthly or yearly basis. Cooperating merchants throughout the world pay a service charge in the range of 47 percent of total billings. Another major card of this type was established by the American Express Company in 1958. A later innovation was the bank credit-card system, in which the bank credits the account of the merchant as sales slips are received and assembles the charges to be billed at the end of the period to the cardholder, who pays the bank either in toto or in monthly installments with interest or carrying charges added. The first national plan was BankAmericard, begun on a statewide basis by the Bank of America in California in 1959, licensed in other states beginning in 1966, and renamed VISA in 197677. Other major bank cards are MasterCard (formerly Master Charge) and Barclay's. Many banks that began credit-card plans on a city-wide or regional basis have chosen to affiliate with major national-bank plans as the range of included services (meals and lodging as well as store purchases) expanded. The system has spread to all parts of the world, including Communist nations. In bank credit-card systems, the cardholder may choose to pay on an installment basis, in which case the bank earns interest on the outstanding balance. The interest income permits banks to refrain from charging cardholders an annual fee and to charge participating merchants a lower service charge. An additional advantage of the system is that merchants receive their payments promptly by depositing their bills of sale with the bank. See also revolving credit.