ZG
while you are correct that most credit cards are evidenced by a signed credit application and the cardholder receives that 6 point typeface cardholder agreement and there is all kinds of language on the monthly statements and and the credit card slip you sign, etc., etc. -- all of which buttresses the argument that a credit card is a written agreement ...
...from a historical point of view, I think the origin was a little different.
Most of our state laws were written a long time ago -- they get updated from time to time but the basic thought process may easily go back a hundred years or more -- some parts of our law regarding debts goes back over 500 years to English common law (the law of necessaries, for example).
Credit cards are a relatively new invention -- about 50 years -- and only commonplace in the last 30 years or so -- and only wildly popular in the last 20 years -- and all the explosive growth in consumer debt in the last 10 years or so.
your grandparents and their grandparents probably had a charge account at the corner grocery store -- they may have had a charge account at the department store downtown -- maybe even a tab at the local pub
I think these type accounts are classically what lawmakers had in mind for what was called open accounts -- the balance goes up and down -- there was no real "contract" or written promise to pay -- a balance ledger was maintained, payments made periodically, etc.
I remember my parents had an account with this little grocery store. When the clerk totaled up the purchase, my dad just signed his name on the adding machine tape. At the end of the month, he would go pay what he could.
I think lawmakers saw these relationships as different from a "bank loan".
What open accounts (at least in that historical context) all had in common was the "credit" existed to facilitate the sale of goods and services from the merchant to the consumer.
Far different was the "bank loan" where cash was transferred from lender to borrower and the transaction was structured as a financing with much more formality and no transfer of goods and services existed from the lender to the borrower.
If you think of it that way, it is easy to see the difference between an open account (facilitate sale of goods and services) and a written agreement (a financial transaction).
However, credit cards really evolved after the concept of open and written accounts had already been codified.
So, from a logic point of view -- what is a credit card?
Well, the first credit card was issued by Wannamaker's (a department store that catered to the society crowd) in Philadelphia. Functionally, it was still an open account because it existed to facilitate the sale of goods and services from merchant to consumer. The "charge account" now had a piece of plastic that existed mostly for purposes of identification and as marketing sizzle.
Diner's Club issued the first of what we today think of as a T&E (travel and entertainment) card -- the forerunner to the general purpose bank credit card.
Diner's Club gave you a piece of plastic that basically said "Mr. Merchant -- please let the cardholder have your service and send us the bill and we (Diner's Club) will pay you directly and we (Diner's Club) will collect from the cardholder later".
This is a fundamental change in the structure of the transaction. The merchant (the provider of goods and services) did not extend any credit and there was a third party involved who assumed the financial risk.
Citibank and Bank of America really developed the true bank credit card with MasterCharge (later Mastercard) and BankAmericard (later Visa). Clearly, these products were developed solely for financial purposes. One could not then and cannot today buy anything from Visa or Mastercard since they do not sell goods and services (with the minor exception of the trashy geegaws advertised on the statement stuffers).
Therein lies, I think, the real historical and evolutionary difference between a "charge card" and a "credit card" -- obviously there was no "intelligent design" involved.
I believe this is the real argument for the statutory difference between open accounts and a written agreement.
Things get all confounded by the confusion between an open account and an open-ended agreement. They are not the same.
A closed-end account is what we classically think of as a bank loan -- like your car loan -- x dollars per month for y months and the monthly payments are all precomputed.
An open-ended account has no fixed maturity date or fixed monthly payment -- is generally considered "revolving" and the balance can go up and down -- there may be "rules" which determine how much must be paid each month or what the interest rate is or the maximum outstanding balance, etc.
A credit card can be an open-ended account. But, for the reasons previously discussed, is rarely an open account.
Much of this confusion today is caused by misunderstanding the definitions section of the federal Truth In Lending Act. TILA contains a definition of "open-ended" and a credit card is given as an example of an open-ended account.
Unfortunately, since "open account" and "open-ended" sound alike, much confusion ensues -- especially with the word "open" being in both.
The TILA does not contain any definition of "open account" since TILA was originally written to codify the method and manner of disclosures related to amortizing loans (primarily mortgage loans and specifically relating to the way that points and other closing costs are expressed as a component of the interest rate and thus allow a comsumer to compare different loan products -- is 7% and 5 points better or worse than 7.5% and 1 point?). In my view, there is nothing in TILA that would really apply to a credit card in any event.
As most everyone knows, I am not an attorney. The preceeding is my independent analysis based on my 30+ years experience as a banker and financial services executive -- and more than casual interest in history. So, don't anyone start being snippy with me if you want to disagree.
That is my story and I am sticking to it, your mileage may vary.
PS -- final trivia -- the most prestigious credit card is the prized Black American Express Card -- it carries a minimum credit line of $1 million and is usually given to members of royal families around the world (especially the fashion conscious and jewelry bedecked daughters of Saudi princes). These cards are issued by invitation only. If you call AMEX and ask for an application, the customer service agent will tell you there is no such thing as the Black AMEX.
