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The history of credit Cards

In a fairly short time credit cards have become a part of everyday life in much of the world. The first known use of the term “credit card” was in an 1887 novel called “Looking Backward” to describe a card used for making purchases.

The first actual cards were introduced in the United States in the 1920s. In 1921 Western Union (the telegraph company) began issuing  cards to frequent customers to charge their services. Other companies started giving cards to customers to buy fuel for the newly popular automobiles that were filling the streets. These “gas cards” were actually “charge cards” rather than credit cards since they required the balance paid in full each month.  A credit card on the other hand provides the consumer with a line of credit on a revolving account with interest being charged on any unpaid balance. It would be many years before true credit cards appeared on the scene.

Early charge cards were printed on paper but forgery became a problem. To minimize this problem a ”charge plate” was developed and used until the late 1950s when plastic became readily available. The plate was about 2 1/2 inches by 1 1/4 inches (about the size of a military dog tag). It was embossed with the customers name and address. When making a purchase, the charge plate was placed in an imprinting machine with a charge slip on which the amount of the purchase was written. The machine imprinted the information and the customer signed the slip to complete the transaction. The completed slip went to the stores bookkeeping department where the transaction was written into the ledger book. At the end of the month (or other billing period) a invoice (bill) was mailed to the customer. Before computers these systems were quite labor intensive.

Starting in 1934 American Airlines and the air Transport Association developed a concept to simplify charge cards by assigning customers unique identification numbers called account numbers. This led to “air travel Cards” which enabled customers by the 1940 to purchase airline tickets from 17 different airlines. The modern  ”buy now and pay later” philosophy was well on its way.

The idea of paying entirely different types of merchants with the same card was made a reality in 1950. The creation of the “Diner’s Club” card was the first general purpose charge card. american express followed in 1958 with a worldwide network of businesses accepting their card. However, at the time these were still charge cards where the entire balance had to be paid. There were no “minimum” payments. Partial payments were not acceptable and could lead to the card being revoked. The criteria for obtaining these cards however was quite strict and therefore default was rather rare.

In 1958 Bank of America launched what would eventually prove to be the first successful general credit card. Their ”Bank Americard” had some problems at first but it was a true revolving credit financial instrument. As it spread around the world Bank of America changed it to its now familiar name “visa Card”. In 1969 Citibank merged its new “everything Card” with a small credit card company called “Master Card” and the other of today‘s giant credit card companies was born.