Until the last century, payments were generally made with coins and bank notes. Cash was also used as savings. Today, savings are rarely in cash. Wages are usually paid into a bank account. Many larger transactions, such as rent, insurance and tax payments, are paid with cheques or transfer orders, or they are paid electronically as standing orders and direct debits.
With the emergence of electronic funds transfer for payments at the point of sale, the credit card, a small card containing a means of identification, such as a signature or picture, became increasingly widespread. It authorizes the person named on it to charge goods or services to his account, on which he is billed periodically.
The use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers for purchase made at company outlets.
Finally, the bank system adopted credit cards. It credits the account of the merchant as sales slips are received and assembles the charges to be billed at the end of the period to the card holder, who pays the bank. The card holder may choose to pay on an installment basis, in which case the bank earns interest on the outstanding balance. The interest income permits banks to refrain from charging card holders an annual fee and to charge participating merchants a lower service charge. An additional advantage of the system is that merchants receive their payments promptly by depositing their bills of sale with the bank.