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Credit cards have been a part of normal life for decades, but where did they come from exactly? Who first started using plastic cards to make transactions?
Credit, of course, has been around for a long time. Stores, bars and other establishments used to keep open accounts called tabs on customers they trusted. When the customer made a purchase, the merchant would make it in a ledger, allowing the customer to pay their bill later.
Credit cards were actually mentioned in 1887 in a novel by Edward Bellamy. Bellamy predicted that in the future people would use small cards to represent their available credit and could make purchases with these cards.
Western Union, in 1914, began issuing purchase cards to select customers. Then, in the 20’s a number of oil companies began issuing out proprietary cards that were designed to create customer loyalty. These cards were accepted at the merchant that issued them and only in certain locations. Gas stations started issuing cards that could be used to make fuel purchases; some gas stations even started accepting competitor’s cards.
Department stores were next to jump on the credit card bandwagon. Department store cards were originally a marketing device, designed to increase the number of customers the store had. It turned out that customers really appreciated the “buy now pay later” aspect of the cards; the stores liked that there were limits to the repayment period. Department store credit cards gave rise to what’s today known as credit history as good customers that paid on time gained a reputation.
The 1930’s and 40’s saw the rise of revolving credit. This began when stores started to let customers pay debt off over months, getting rid of repayment periods by requiring that all debt be completely paid before any new purchases could be made. Customers could now actually carry a balanc eon their cards that wasn’t due within a specific period of time. This is also when credit card companies really began to make money from interest and fees associated with cards.
In 1946 the first bank card was introduced by a banker named John Biggins: this card was called the Charg-It. When a customer used their Charg-It card for a purchase the bill was forwarded to Biggins bank. Next, the bank reimbursed the store. Transactions could only occur locally and cardholders were required to have an account at Biggins bank. The first bank credit card came five years later, showing up in New York’s Franklin National Bank.
Ralph Schneider introduced the all-purpose credit card in the 1950’s to give a solution to carrying around a credit card for each store or merchant. Diner’s Club, American Express and Visa came into existance around this time, gaining popularity over the decades. Diner’s Club, for example, started in 1950 and was used for entertainment and travel. Diner’s Club claims it’s the first credit card that gained widespread use and had 20,000 cardholders by 1951. The cards were originally cardboard and were replaced by plastic in the 60’s. American Express, formed in 1850, didn’t get into credit cards until 1958 when they introduced the world to a purple charge card. A year later they introduced the first plastic credit card.
In 1966, Bank of America started their BankAmerica Service Corporation and a national credit card system was formed and called the InterBank Card Association. ICA is now Mastercard Worldwide.
The credit card industry has been growing faster and faster since the 1960’s, constantly introducing new service and products to the American consumers. A number of new developments, including online accounts and new ways to read credit cards, mean the industry isn’t done growing.