The History of the Credit Card
Credit dates back to Egypt and Babylon nearly 3,000 years ago, giving the concept of "buy now, pay later" a long history. However, it wasn't until the development of the credit card and revolving balances in the second half of the 20th century that personal debt began to rise. Diner's Club, American Express, Visa and MasterCard all made their mark in the history of the credit card.
Other People Are Reading
-
Shoppers' Plate
-
During the earlier portion of the 20th century, oil companies (in response to the booming automotive industry) and department stores issued in-store credit cards, known as shoppers' plates, to their customers. It was a way of developing customer loyalty, boosting sales and establishing stronger customer service. These cardboard cards were only acceptable at the issuing store and in limited locations, though some fuel stations offered cards that customers could use nationwide. Card holders had to pay the balance of the card off each month.
Charg-It
-
In 1946, a Brooklyn banker named John Biggins established the first bank card, calling it "Charg-It." Individuals that maintained a bank account at Biggins' bank could use their Charg-It card with local retailers and merchants. The store would then send the bill to Biggins' bank, the bank would pay the store and then request payment from the bank customer. The purpose was to allow bank patrons the opportunity to purchase merchandise on a whim or services in an emergency without having to go to the bank to get cash.
-
Diners Club
-
Frank McNamara and Ralph Scheider established the Diners Club in 1949 after McNamara forgot his wallet while dining out and decided there needed to be an alternative to cash for just such and occasion. Diners Club issued its first card in 1950 that card holders could use in 27 New York City restaurants. By 1951, nearly 20,000 people were Diners Club members. Card holders made meal purchases on credit, but it was more like a charge card because they had to pay the bill off each month.
American Express
-
Formed in 1850 and specializing in traveler's checks and money orders, American Express saw a need for travelers to have something more convenient to use on the road. American Express issued their first purple charge card for entertainment and travel expenses in 1958. One year later, American Express introduced the first plastic charge card. It was one of the first to expand the credit card industry globally, with more than 1 million cards used in 85,000 businesses by 1963.
Revolving
-
1959 saw the introduction of revolving credit. Up until that point, credit card holders had to pay their balance off each month, a system now known as "charge cards." Credit card companies saw the potential for profit and began allowing card holders to maintain a balance on their credit cards, making a minimum payment each month and incurring interest charges on the unpaid amount -- a system many are very familiar with today. The appeal, of course, is more flexibility in purchases and the true meaning of the "buy now, pay later" phenomenon.
Associations
-
In 1958, Bank of America sent the Bank Americard (later known as the Visa) to 60,000 residents of Fresno, Calif. By 1966, Bank of America established the BankAmerica Service Corporation and franchised its credit cards to banks all over the nation. This was the first sign of a national credit card system. The establishment of InterBank Card Association (ICA) was that same year. While previous credit cards to this point had a "closed-loop" system, with credit card companies dealing directly with customers and merchants, the new credit card associations started an "open-loop" system that required cooperation between banks through funds transfers. BankAmerica Service Corporation is now Visa, while ICA is MasterCard Worldwide.
-
References
Resources
- Photo Credit Direct Lending Solutions
