Believe it or not, there was a time when consumers had no choice but to pay cash or write a check for every purchase. And it wasn’t that long ago, either. Here’s a brief timeline showing the recent and rapid evolution of credit cards:
Early 1900s – First charge cards (meaning balances must be paid off monthly) are issued by retail stores.
1920s – Oil companies issue temporary “courtesy” gasoline cards to automobile owners. The cards are charge cards lasting three to six months.
1950 – Diner’s Club issues the first “travel and entertainment” charge card, which lets consumers charge expenses at hotels and restaurants. The Diner’s Club card is a breakthrough because it can be used at any merchant that accepts it, even those located outside the cardholder’s geographic region.
1958 – American Express introduces its Green Card – another travel and entertainment charge card. Payment in full is still due every month.
1966 – Bank of America issues the first true credit card, an all-purpose or “universal” card that allows customers to run a balance on their account. Bank of America’s card is eventually renamed the Visa card and becomes the most popular card in the U.S.
1970 – 16% of American households have a credit card.
1995 – 65% of households own a credit card.
2016 – 70% of households have a credit card. 183 million American consumers own a card and there are 1.27 billion individual credit cards in use.
Americans have taken to the convenience credit cards offer. However, there are modern alternatives to credit for those trying to avoid falling into the temptations credit cards bear. Credit cards aren’t perfect. Cardholders hate the high fees, late-payment penalties and billing hassles. Credit cards also make budget-busting impulse purchases all too tempting.
If you’re hesitant to jump on board with credit cards, there are alternatives!
1. Cash
Some may think using cash for all purchases is medieval, but it works! One method to ensure you have enough for day-to-day expenses is to put cash into separate envelopes at the beginning of each month. One for groceries, one for gas, etc. This way, when the cash is gone, it’s gone. No more worrying about spending more than you have. Check out how one of our Dollars and Sense readers tried out the method here.
2. Debit Cards
Debit cards can be a safer alternative to the overspending temptation of credit cards. If you don’t want to carry around cash, debit cards can be a good option for everyday expenses. Talk to your bank about your option for preventing overdraft.
3. Installment Loan
Installment loans vary from credit cards because they are a closed-end type of credit. You receive a one-time sum from the lender and you make pre-determined monthly payments for a specific number of months until the loan is paid off. You might find this type of credit works better for you. With installment loans, payments remain consistent, so budgeting becomes easier. With credit cards, payments depend on balances and can vary a great deal. These loans also make it more difficult to overspend. Your loan is for a set amount and you are not able to spend more than the lump-sum you received. You will find more information on installment loans here.
Budgeting and credit is a personal choice. There is no clear answer on the “right” type of credit to use. Choose the type of credit that works best for your needs and you should have no problem keeping your budget successful.
