In this episode of
Money Creation Explained we are going to cover How Did
People Pay Before Credit Cards?
Before credit cards, almost all consumer and business
purchases were paid with cash, checks, and IOU’s (I Owe
You). By the early 1900’s some businesses issued credit in
an IOU form that was tracked in a paper ledger and due at
the end of the billing month. In the early 1920’s, gasoline
cards were introduced which could only be used for a
specific brand or geographic area. By the 1950’s early form
of credit cards got introduced where cards could be used
anywhere in the merchant network. Transactions were
documented with paper forms and copies, and security was an
issue because paper forms could get lost, forged, or altered
during processing. Credit cards entered the mainstream with
widespread acceptance in the 1960’s. As the years passed,
technology and the credit card systems improved.
Before credit cards, people made wiser decisions with their
money and were also able to save more. This was due to the
fact that every time a purchase was made, real money needed
to be exchanged; cash and checks which represent funds being
deducted from a person’s bank account so people were trained
to make wiser purchases. After credit cards became the norm,
people got lines of credit that represent money that could
be paid back later. For someone who is good with finances,
credit cards are a good option, but for people that lack
financial skills, credit cards are the easiest way for them
to fall into and stay in debt. Credit Cards have high
interest rates up to 29% APR (Annual Percentage Rate) plus
late and other fees.
An alternative to credit cards are IOU Notes which is a
peer-to-peer credit and loan platform. It is not based on a
person's traditional credit score (FICO), but rather on
their IOU Credit Report and their ability to pay back
others. Every user on the IOU Notes platform can decide who
to give credit and/or lend to, how much and the terms (1- 24
months) and (0% - 5% interest rate).
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