Credit cards seem to be a household product these days. The truth is, most Americans have at least 1 or 2 cards in their wallet. However, the vast majority of consumers aren’t quite sure as to where they came from. They know the basics on how credit cards work but, are not to familiar with what need credit cards were meant to fill. With that said, below is a definitive description of where credit cards come from and what need they were designed to fill.
It all started back in 1949. In this time period, consumers did not have the credit card option but, did have the charge card option. The charge card allowed consumers to make real time purchases through the use of their charge card. The card would have information that allowed the lender to track who owed what. But, charge cards only allow consumers to carry a balance for one month. At which point, the consumers would have to pay their entire balance.
In 1949, Frank McNamara, head of the Hamilton Credit Corporation had a struggle with a customer. The customer could not pay his charge card dues back in time because he allowed his friends to use his card throughout the month. His friends could not come up with the money fast enough to pay the debts on time so, McNamara’s client could not pay McNamara fast enough.
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Looking for a way to help this client and clients like him, in a mid meal conversation with his friend and attorney, Ralph Sneider, McNamara brought up the situation he had earlier with his customer. During this meal, the concept of credit cards was created! These new credit cards would allow consumers to make purchases real time. As the consumers made purchases, the lender would use the cards to track the account information to make sure they know who owes what. However, unlike charge cards, these cards would allow consumers to carry a balance from month to month as long as they made a minimum payment. The lender would of course charge interest for this privilege!
Credit Cards Turned Out To Be A Great Product Until…
Credit cards really did turn out to be a great product. Mr. McNamara and Mr. Sneider really revolutionized the industry with this product. However, at one point, consumers started using credit cards improperly. Racking up debts they could not afford to pay back, these consumers eventually found themselves in the midst of financial hardship. This kind of thing still goes on today so, before using a credit card of your own, you need to make sure that you can use it properly. This way, you won’t find yourself overwhelmed by credit card debt! Here are a few tips to help you make sure to use your credit cards properly:
Tip #1: Never Spend More Than 50% Of Your Credit Limit – When consumers spend more than 50% of their credit limit, it is generally an early sign of financial hardship. Credit cards are meant to provide a financial pillow. However, when you use more than 50% of your credit limit, you may find that the debts have become to high to feasibly pay back within a reasonable amount of time!
Tip #2: Always Double Minimum Payments – Although they will keep your account in good standings, minimum payments will not do much more for you than that. The only way to keep your debts under control and show your lenders that you are capable of aggressively paying them off is to send extra payments. I generally advise my clients to double their minimum payments each month.
Tip #3: Never Wait Until The Last Day To Make Your Payments – Finally, it’s important to remember that you due date is the last day that your lender is willing to accept a payment from you. However, it’s OK to send payments early. As a matter of fact, doing so is a great idea! I always suggest sending payments in at least 2 weeks in advance!