» The History of Credit Cards
There are stores now that do not accept cash. The history of credit cards is quite remarkable as using plastic has now become a way of life for buying everything we wish to purchase. The practice of using credit or buy now pay later goes all the way back to the Babylonians but the current practice of using credit cards harks back to the early 1900s. Oil companies and department stores were the first businesses to issue proprietary cards according to a report by the Philadelphia Federal Reserve. These cards called shoppers plates could only be used in the stores that issued them and were created to bring repeat business and loyal customers. In 1946, a banker John Biggins with the Flatbush National Bank of Brooklyn introduced the first bank card. The card which was referred to as Charg-It, could only be used in local businesses. If a customer used the card the resulting bill would be sent to Biggins’ bank for payment which would then bill the customer. New York’s Franklin National Bank followed Biggins example with a bank credit card for their customers in 1951.
First popular credit card
The first credit card to come into common use is the Diners Club Card which was created by Frank McNamara and his business partner Ralph Schneider in 1950. This card could be used for travel and entertainment at businesses that accepted the card. The first card was made out of cardboard. The Diners Club card turned out to be very popular with consumers. By 1951 20,000 people held Diners Club cards. The cardholders were required to pay their entire credit card bill every month. Traveling salesmen loved the convenience of the travel cards.
American Express entered the credit card industry in 1958 with a travel and entertainment card. American Express is the first company to issue cards made of plastic which it introduced in 1959. An industry was born and American Express began offering credit cards to consumers in foreign countries in addition to the United States. In the first five years of business, American Express issued approximately one million cards. These cards were honored at more than 85,000 businesses. American Express offered the first all purpose card in the 1990s. Bank of America is credited with offering the first all purpose credit card in 1966, which eventually became known as Visa.
Birth of credit card debt
During the 1960’s the credit card industry also evolved to offering revolving balances which allowed customers to carry balances. Revolving balances brought about finance charges bringing with it the first examples of credit card debt.
The creation of the InterBank Card Association formed by a group of credit issuing banks in 1966 brought about what is now known as MasterCard. Both Visa and MasterCard were administered by member banks run by board members from the banking organizations. New banks that wished to offer bank cards to their bank holders would join either the Visa or MasterCard associations. These credit card associations allowed even smaller banks to offer cards to their customers. Eventually banks could belong to both associations giving them the opportunity to offer both Visa and MasterCard to bank customers. See also, credit cards.