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Credit CardsArguably the biggest financial innovation of the past 100 years, credit cards are familiar pieces of metal or plastic that allow cardholders to borrow funds to pay for goods and services.
Unlike debit cards, which draw money from the cardholder’s checking account, credit cards allow the cardholder to borrow a certain amount of money (called a credit line) from the card issuer (typically a bank or other financial institution) based on their creditworthiness.
Credit cards are also the fourth-highest source of US consumer debt. Americans had roughly $1.2T in credit card debt as of Q3 2024—almost as much as they had in auto loans at the time ($1.6T), and significantly more than home equity loan debt.Explore Credit Cards
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Contactless credit cards descend from a batteryless Cold War listening deviceThe same physics that let Soviet spies eavesdrop on the US ambassador in 1945 underlie contactless payment methods today. The device is a passive chip powered wirelessly by incoming radio waves. VeritasiumThe Platinum American Express card is among the most expensive mainstream travel credit cardsAmerican Express charges a $895 annual fee on its Platinum Card in exchange for nearly $3.5K worth of credits and benefits. Some of the credits include a $600 for hotels, a $400 credit at restaurants with Resy, a $300 Lululemon credit, and even a $200 credit at Oura ring. (Some users may experience a paywall.) Old credit cards can be made into guitar picks, phone stands and moreExperts recommend always cutting through the chip and the card number when disposing of expired credit cards, as the magnetic strip, the chip, and the card number all contain information that thieves might be interested in. The Motley FoolHackers once used 'Fortnite' to clean money from stolen credit cardsHackers using stolen credit cards would create "Fortnite" accounts and purchase V-bucks, the in-game currency. The hackers would then sell the entire "Fortnite" account on sites like eBay. For instance, an account with $100 worth of stolen V-bucks might sell $25 on eBay. VarietyManaging too many credit cards can be costly if they have annual feesHowever, canceling cards must be strategic if it becomes necessary, as it can negatively impact your credit score. Before canceling, experts suggest asking if it's possible to downgrade to a no-annual-fee version in order to keep the account open, thus preventing potential hits to your credit score. The Motley Fool'1440 Explores,' Episode 1: How Credit Cards WorkWe unpack how your $5 latte triggers a global relay between banks and networks like Visa and Mastercard, trace the 1958 campaign that jump-started the credit card revolution, and reveal how a trillion-dollar system quietly shapes the way we spend.
1440 ExploresThe history of credit cards begins with the 'Fresno Drop'On a 1958 morning in Fresno, California, about 60,000 people woke up to find a strange rectangular piece of plastic on their doorstep without explanation. Those chosen for the “Fresno Drop” didn’t know it yet, but Bank of America was behind the credit card delivery stunt. 1440 DailyRewards credit cards can offer points, travel miles, and moreFor every dollar that a cardholder spends on a rewards credit card, they can also receive benefits such as cash back, airline miles, and more. For many, rewards are the reason they make so many purchases on credit cards in the first place. InvestopediaCharge cards are different from credit cards Unlike credit cards, charge cards often don’t have a preset credit limit, but cardholders need to pay off the entire balance every month. BankrateCredit cards were the fourth-highest source of US consumer debt as of 2024US consumer debt nationwide totaled $17.9T as of 2024 Q3. Mortgage debt ranked as number one, with student loan debt coming in at number two. Education Data InitiativeWhy there are microchips in credit cardsCredit cards have evolved significantly since their invention in 1950, but security lagged in the US for years. Despite handling only a quarter of global transactions, the US once accounted for half of all credit card fraud. The 2013 Target data breach helped push the adoption of chip cards, reducing fraud but shifting risks to online scams. 1440The Consumer Financial Protection Bureau (CFPB) is looking closely at BNPLGiven the lack of data around BNPL services in comparison to other financial products such as credit cards, the CFPB has conducted research to better understand BNPL products and how they could harm and benefit consumers. Consumer ReportsGap and Sephora now accept BNPL, despite paying up to 8% per saleDespite these merchants paying roughly 2% to 8% of each sale's cost (more than they pay for most credit card processing fees), they're signing on in part because BNPL can help them improve their conversion rates at checkout. MarketplaceAffirm's COO recently said that the company believes the credit card is 'going the way of the VHS tape'Some people use buy now, pay later apps as an alternative to credit cards. BNPL services have a lower barrier to entry than credit cards—many frequent BNPL users have low credit scores. YouTubeNearly half of millennials and Gen Z use BNPL, versus 21% of older generationsWhile applicants typically need a good credit score and credit history to qualify for many credit cards, that's not the case with buy now, pay later loans, making them more accessible forms of payment for younger generations. SpotifyAmerican Express uses co-branded cards to provide brand-specific perksCo-branded credit cards are partnerships between a card issuer and another company. Unlike regular credit cards that offer many different kinds of benefits at different companies, co-branded cards tend to only offer perks with the partner company. For example, American Express has a co-branded card with Delta airlines that allows users to earn points specifically towards the Delta rewards program. American ExpressHow 'Don't leave home without it' became the American Express taglineThe tagline was created by legendary New York advertising firm Ogilvy & Mather. Its first commercial was fronted by Karl Malden, famous for his role in the TV show "The Streets of San Francisco." The slogan was originally designed for American Express traveler's cheques, but was revived for the company's credit cards. (Some users may experience a paywall.) In 2025, American Express paid $230M to settle fraud and deceptive marketing chargesAmerican Express launched a wire payment service targeted at small businesses and falsely touted the service as a tax-deductible business expense in 2018. American Express was also accused of allowing small businesses to open corporate credit cards without the necessary employer identification number (EIN). CNBCAmerican Express has acquired restaurant software companies to elevate its cardholder experienceOne of the many perks of American Express cards is dining credits and special reservation access to fine dining restaurants. Since American Express cardholders are often more affluent than other credit card users, restaurants have benefited from increased partnerships with American Express to offer cardholders preferential reservations and premium experiences. In 2019, American Express acquired Resy, a reservation software, and went on to acquire Tock in 2024. American Express was the first company to offer 'gold' cards to borrowersAmerican Express began offering gold cards to affluent consumers in 1966. However, other credit card companies began offering similar, premium cards in the 1980s, which quickly became a status symbol for wealthy Americans. TIMEIn 2013, American Express became the first credit card company to open an airport loungeAmerican Express opened its first airport lounge, the Centurion, in Las Vegas more than a decade ago. Since then, not only has American Express increased the number of lounges it has in airports across the country, but other credit card companies have also opened lounges. Business TravellerThe 'Centurion' card is American Express' highest tier, invite-only credit cardThe Centurion card or "black card" debuted in 1999 and created the trend of credit card companies' most exclusive cards being black. Centurion cards are technically invite-only, but you can fill out a form to request being considered for the card. It has a $5K initiation fee and a $5K annual fee. YouTubeAmerican Express runs on a 'spend-centric' model, using perks and merchant fees to drive profitAmerican Express cardholders tend to spend more money per transaction than other credit card users, which makes the interchange fees merchants have to pay to accept American Express cards worth it while incentivizing other companies to pay the interchange fee as well. InvestopediaCard issuers are financial institutions that open credit to customers, while card networks facilitate purchases between merchants and customersCard issuers give customers credit cards, set rate limits, and collect payments. Card networks, on the other hand, dictate where credit cards can actually be used by managing relationships between the network and merchants. These networks make money on interchange fees, which merchants pay to accept a specific card network at their stores. CNBCAmerican Express is both a card issuer and a processing networkUnlike most credit card companies, American Express issues credit cards and processes payments—something called a closed-loop model. By offering both services, American Express profits from both interest and interchange fees, and also has access to more data on how customers spend their money so it can offer better perks. CNETAmerican Express debuted its first charge card in 1958 to give travelers access to cash abroadThe original American Express charge card was made of purple paperboard and allowed customers to book travel. Unlike credit cards, the card's balance had to be entirely paid off each month. When the card first launched, 250,000 customers used it, and 17,500 companies had agreed to accept it. HISTORYIn 1882, American Express began offering money orders to compete with the US Postal ServiceMoney orders were American Express' first move into financial services. USPS launched its money order service in 1864 as a way for Civil War soldiers to send money back home. Between the 1880s and 1920s, immigration into the United States surged;the American Express money order service gave immigrants a way to send money to family members living in other countries. American Express caters its business to wealthy cardholdersAmerican Express cards charge high annual fees, but also offer significant rewards and credits. It's just one way the company targets affluent customers who spend higher dollar amounts per transaction and tend to have more transactions than the average cardholder. This strategy decreases the company's risk, since it actually offers credit instead of just acting as a card network. CNBCFraud and identity theft are among the most common dark web-related crimesCredit card information, driver's license or passport scans, and login credentials are among the data bought and sold on dark web marketplaces, which can appear there without users' knowledge through data breaches. Medical records can fetch higher sums of money for their potential use in blackmail and insurance fraud. ExperianAlaska has the highest lifetime credit card debt of all US states at $484,620That's 21.8% above the national average, partly due to Alaska's high cost of living and remote nature, which makes shipping in food and fuel more expensive. Iowa had the lowest average lifetime credit card debt out of all the states in the US at $319,740. Visual CapitalistGas stations top the list of riskiest places to use a debit cardUnlike credit cards, debit cards withdraw funds directly from your checking account, and federal laws provide fewer consumer protections against debit fraud. Gas station "skimmers" and long periods of separation from the card at restaurants are some of the more vulnerable spots for use. BankrateOnly 14% of transactions are in cash, as of 2025Credit (35%) and debit (30%) cards have long eclipsed cash as the primary method of payment in the US. It is a primary backup, however, with 90% of customers intending to use cash to pay or store value and 80% carrying cash. FRB ServicesThe average US household carries $105,056 in total debtThis article breaks down the average household debt by category, including credit card debt ($6,523), personal loans ($11,274), and more. The Motley FoolWhat really happens when you tap your credit cardEvery tap sets off a lightning-fast relay. When I buy coffee with my Visa, a tiny "runner" races between the coffee shop's bank, Visa's network, and my bank—all in under a second. The catch? No money has actually moved yet. Here's what really happens behind that instant "Approved."
1440How Sears helped create Discover CardSears owned the financial services company Dean Witter, which rolled out the Discover Card in 1986. The Discover Card is just one of many Sears inventions that seems to have outlasted Sears’ peak popularity, including Allstate Insurance and the clothing brand Lands End. InvestopediaUS women got the right to open a credit card in their own name in 1974Before that year, banks in the US were legally allowed to deny women credit or charge them higher interest if they failed to get a male cosigner. KiplingerWho actually pays for your credit card rewards?In 2018, 92% of all credit card spending was made on a rewards card, which seems like a good deal to many who apply for rewards cards offering discounted flights, points, and more. But in actuality, the customers are often the ones who end up paying for the rewards in the grand scheme of things. VoxCredit card companies make money through interest, annual fees, and moreThey also profit from interchange fees, the fee the retailer has to pay the credit card network in order to facilitate a transaction. The fee is typically between 1% and 3% of the transaction amount. Yahoo FinanceA credit card’s grace period is a minimum of 21 daysUnder federal law in the United States, an individual’s credit card payment due date must fall on the same day of each month, at least 21 days after the cardholder’s statement closing date. NerdWalletMerchants have to pay credit card transaction fees each time a card is swipedCredit card networks such as Visa, Mastercard, and American Express must calculate fees for not only the customer, but also the merchant in every transaction. NerdWalletAmerican Express has a roughly 20% market share by purchase volumeAmong the major credit card companies in the US, American Express had 19.50% of the market share in 2025. Visa and Mastercard had 52.20% and 24.90%, respectively, and Discover had the smallest market share of 3.50%. WalletHubVisa’s origin storyBank of America helped start Visa, the first credit card network, years after it rolled out its first credit cards. But today, Bank of America only owns roughly a 1.5% share of Visa—many other banks (as well as institutional investors) help govern and profit from the network. AcquiredSee an original Diner’s Club charge cardBefore credit cards, there were charge cards from companies like Diner’s Club. While credit cards allow cardholders to carry a balance from month to month (potentially accruing interest), charge cards like Diner’s Club cards had to be paid off right away. National Museum of American HistoryCredit card issuers determine your credit limit using your payment history, income, and moreSome credit card issuers also take your other payment obligations into account when determining your credit limit, such as the cost of your rent or alimony. NerdWalletMicroplastics are infiltrating the human body with unclear but concerning effectsScientists have linked microplastics to immune system damage, hormone disruption, inflammatory diseases, and even cancer—yet most of their health impacts remain unknown due to limited research. Studies suggest we ingest about a credit card's worth of plastic weekly. National GeographicPrivacy concerns in the credit scoring systemBecause credit scores use a lot of personal information (such as whether or not someone makes credit card payments on time), some worry their privacy is being compromised in the data collection process. NBC4 WashingtonHow to check your credit scoreContrary to popular belief, checking your credit score doesn’t hurt your credit. Many credit card companies show your score when you log into their app online, but there are other ways to check it. Consumer Financial Protection BureauFive primary factors determine your credit scoreYour credit history is used to calculate your credit score. It includes information such as how often you miss payments (on credit cards, for instance), the types of financial accounts you hold, how long you’ve held those accounts, and more. SECU Credit UnionWhat is buy now, pay later?The buy now, pay later industry allows consumers to buy something immediately and pay in installments, typically without the need for applications or credit scores associated with credit cards. BNPL has boomed in the last decade, led by fintech companies Affirm, Klarna, and Afterpay, which have targeted young adults. Some critics say BNPL is a reinvented version of payday loans that allow borrowers easy access to cash with relatively few barriers. The Wall Street JournalWhy Americans are drowning in credit card debtAmericans owe more than $1T to credit card companies. And with rising interest rates that prevent cardholders from paying down debt (not to mention the rising cost of living), that number is likely to keep growing. A podcast episode explains how the US got here, and what policymakers and individuals can do about it. Spotify
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