Online FAQs
When did credit start being issued?
While the first credit cards were issued by the Diners Club starting in 1950, credit was not a new concept and had been practiced off and on for at least 500 years. One of the earliest forms of credit was issued by the Dutch in the form of tulip contracts. These contracts were traded as actual tulip bulbs that were in the ground, tulips being the popular monetary unit of the time. People were actually trading tulips that were buried in the ground for very valuable goods. One tulip bulb was said to be traded for 12 acres of land. Bulbs were traded for 10 times the annual salary of the average worker. These contracts actually caused what is believed to be the first speculative bubble which burst in February of 1637 temporarily destroying the entire Dutch economy. Speculative bubbles have been disastrous for many currencies through out time when proper lending practices are not followed. The current credit situation is failing because of many speculative bubbles that have combined to create a massive illusion of wealth that doesn’t exist. If history tells us anything it is that the bubble will burst eventually. Credit can only be beneficial when lenders and their customers have confidence in each other and the value of the currency.
What does the future of credit look like?
Credit will only last as long as banks feel that a customer can pay off the loan as well as the interest. In a bad economy many banks will have stricter standards and higher fees, while a good economy promotes lending. Over-active lending practices can have a negative effect on an economy when high interest rates are charged or when people default on their payments or declare bankruptcy. Paying for goods and services with plastic cards will still continue even without credit. Bank accounts are linked to these cards which process payments very similarly. New designs in card technology are changing the shape, size and way payments are being made. Radio frequency chips are being installed into cards that can be read by RF readers even through clothing and wallets which can speed up the payment process. MasterCard has put one of these RF chips into a watch. Now your watch can have a 10,000 limit, be scanned wirelessly as well as tell time. Because of the opportunity for fraud these will probably be used in combination with some form of biometrics, such as a thumbprint. Identification cards are beginning to come standard with RF chips, so they may be used in combination with those. Having a unique chip that verifies a person and has their account funds accessible could be beneficial to some, but it raises a number of questions of personal security and privacy as these chips are controlled by the government and banks that issue them and could be potentially shut-off, altered or otherwise controlled.
What affects my credit score?
Every time you use a credit card it can change your credit score. A high score allows for more credit to be issued, while a low score can make securing credit vey difficult. Delinquent payments adversely affect it, especially when it is over 30 days late. Trying to get more credit cards or lines of credit can adversely affect your score as well, if you are not a suitable candidate. Having more than 15-20% of you annual income as debt will negatively affect it as well. Improving a credit score is difficult, it is not recommended to close accounts on cards that have a good credit history, but it is also not recommended to leave a card idle for very long. Unused credit can also negatively affect your rating. To improve your score you have to consistently buy with credit, pay some of it off every month but always keep a balance that is being charged interest. Credit card companies and banks will reward you with a higher rating for paying them interest, it is as simple as that.
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