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The concept of the credit card has been around since the late 1800â€™s when coins and plates were used to charge accounts as a modern day â€˜tabâ€™. Credit cards began to emerge in the early 1900â€™s as proprietary cards and were issued to the oil companies and department stores as a way to improve their customer service. In the 1960â€™s, these cards were soon replaced with plastic and were coined the term â€˜charge cardâ€™, and the bill had to be paid in full at the end of the month.
American Express was the competitor for the U.S. Postal Service, money orders and travelerâ€™s checks as they specialized in many of the same deliveries. By 1987, American Express issued credit cards that allowed its users to pay a monthly fee with no annual fees, low introductory rates and reward programs. It wasnâ€™t long after that other credit card companies joined in and began to sprout across the nation.
So now that youâ€™re interested in obtaining a credit card, there are quite a few terms that you may not understand. One of the most misunderstood is the annual percentage rate (APR).
This is your interest rate for an entire year, not a monthly fee; this number can be anywhere from 0-23% depending on your credit and the credit card company. Another common misunderstood term is interest. Interestingly enough, this is not for your benefit; interest is how the credit card issuer gains revenue from you over time. The more money you borrow from the credit card company, the more interest you pay the issuer for their personal profit. Cash advance fees are another way for credit card companies to reel you in. These should be avoided at all costs as the interest rate on these are usually very high, but should you need to use this feature, make sure to pay the amount back as soon as possible to prevent an expensive credit card bill.