Question

• How do credit and interest, in the form of a modern credit card, compare with the early forms of credit and interest you saw in the medieval Italian banks? What is the same? What is different?

Answer 1

In medieval times, the concept of interest was not present and the borrowers who were provided with advance were charged commissions depending on the longevity and the sum of the money. Similarly depositors were provided commissions by the banks and not given an interest.

In the modern times, the credit card companies charge interest, late fees and other charges from borrowers. Also depositors can get interest from banks for parking their money.

Thus the concept of interest is a new development. The idea of financial intermediation has remained the same and there is a cost associated with it which the intermediary used to charge in medieval times and does so even now.