How Credit Cards Work – The Fundamentals

This article explains in detail how credit cards work. It contains detailed information on what are credit cards, credit card history and much more. In addition this article gives information on the aspects mentioned below

  • What are general purpose and store credit cards?
  • What is the principle behind credit cards?
  • How do credit cards help you in purchasing?

If you have ever made a purchase using a card such as a Visa, MasterCard or other major credit card, you may have wondered how credit cards work. Whether you call them plastic, credit cards, or charge cards, if you use any credit cards, they work much the same way.

Credit Card History

Credit cards were first introduced in the United States in the 1930s. They were meant to encourage shoppers to buy. By the 1950s, credit cards were a widespread phenomenon, with many users and many companies issuing cards.

What are Credit cards?

Credit cards are simply cards that identify you as someone who is authorized to enjoy credit when buying at some stores, restaurants, and other establishments. There are many companies offering credit cards to customers. Today, you can get credit cards from hotels, airlines, stores, banks, and many other institutions.

In general, there are two types of credit cards – general-purpose cards and store credit cards. General-purpose cards can be used at many establishments that accept credit cards. If you are at the cash register of your favorite store, for example, you may notice small signs that say Visa, Amex accepted here. That is an indication that customers with an American Express or Visa card can pay for their purchases with credit cards.

The second type of credit card is for one establishment only. For example, many department stores today allow you to get a store card. This card can be used to pay for purchases within the store. However, only the store allows credit card processing. Other stores will not accept your card.