The idea of the modern credit card is pretty recent. Before 1958, there was no stable revolving credit system that was generally accepted by a large number of merchants. A dozen or so small American banks tried but failed. Then in 1958, Bank of America launched the BankAmericard in California, which became the first successful recognizably modern credit card. Then in 1977 with its overseas affiliates, it changed its name to Visa.

Today’s credit card transactions follow the same idea whereby people can travel all over without cash. When a credit card is used for any transaction, the vendor transmits information from the customer’s credit card to a third party who examines the information and applies a credit or debit to the corresponding account. The most common credit card transactions are captures, which deduct a purchase amount from the credit account, and authorizations, which verify available funds and secure those funds. This prevents the funds from being applied to another purchase prior to capture.

Any time a customer is owed a refund, the purchase amount is credited back to the credit card. A transaction that has been submitted through the capture process but has not yet been completed can be voided instead of credited. In many credit card transactions, an attempt to void the transaction either immediately after it takes place or prior to submission of a “batch” of transactions to the third party credit card processor will be sufficient to cancel the transaction and avoid the need to issue a credit later.

In the past, only banks offered credit cards. Today, many companies offer credit cards. These come with benefits to the customer, such as rewards points, cash back and discounts. They also tend to me more lenient with fees. However, many of these non-bank business credit cards are actually managed by banks behind the scenes.