Loans, credit, insurance & investment

In the early days most issuers were banks but over time the number of non-bank institutions issuing credit cards has risen sharply. A small number of these issuers manage their own credit card business and finance the receivables. Many other cards, commonly called affinity cards, are issued in the name of a particular organization or association with a large membership base but the business is actually run by a bank. The association is able to negotiate better terms for its members in terms of pricing and supplementary features.

Although a number of stores had introduced charge cards for the use of customers in their own stores the first credit card proper was introduced by Bank of America in 1958. Approximately two billion cards are now in issue worldwide with the major brands being Visa and MasterCard.
Credit cards have been one of the most successful and profitable retail financial products. Their adoption worldwide has resulted in a huge complex industry. Many credit cards now offer supplementary features but at its most basic a credit card provides three functions:
A method of payment. Credit cards provide a cash less form of payment. In early years this was done through the use of paper slips but today the vast majority of payments are made electronically. A method of payment guarantee. Most hotels require either a cash payment in advance or a credit card imprint to shield them against the risk of a customer checking out without paying. A revolving credit facility. This provides customers with a credit line with a preset limit that they can draw down against without having to seek specific approval. The cardholder is not required to pay off the entire balance at the end of the statement period but has to make a minimum payment generally defined as a percentage of the outstanding balance.
Many banks now offer debit cards. These cards provide the first two of the above functions. The major difference is that they are linked to the customer’s bank account and this is debited at the time of payment. They are either issued under the Visa or MasterCard brand using their network services or under a country-specific brand. These are more common than credit cards in some countries, particularly those where there have been regulatory restrictions on the issue of credit cards to customers. In some countries, for example, credit cards can only be issued to customers meeting minimum income requirements specified by regulatory authorities.