The History Of The Credit Card
Initially introduced to be used to borrow money
the credit card has become a financial staple
of the American family. Credit cards are easier
and safer to carry than cash in many instances.
Credit had been used extensively to keep workers
in line. Long before the credit card, companies
would extend credit to its workers to buy necessities
then take the dollars off the worker’s pay
checks. This had the effect of keeping the workers
broke and indebted to the bosses so that they
had to keep working to support their families.
References to credit cards have been made as
far back as 1890 in Europe. Early credit cards
were basically merchant cards between consumer
and a specific merchant. . However, the real use
of credit cards is believed to have originated
in the United States during the 1920s, when individual
firms, such as oil companies and hotel chains,
began issuing them to customers.
Credit cards were not always been made of plastic.
There have been credit tokens made from metal
coins, metal plates, and celluloid, metal, fiber,
paper, and now mostly plastic cards.
Up until the beginning of World War II, department
stores, oil companies, communication companies
and travel and delivery companies issued cards
to their customers in exchange for a promise of
deferred payment. As the public started using
this type of credit more and more, banks became
interested and decided it would be a good way
to make money.
The Franklin National Bank of New York introduced
the “Charge It” card in 1951 which
could be used at local retail businesses. These
card transactions were authenticated by the bank
at the time a purchase was made. The merchants
were reimbursed for their sale and the debts were
collected from the card-owners at a later date.
Not long after that Diner’s Club released
their own charge card which could be used for
travel and entertainment. These cards were designed
to attract traveling business people who did not
want to carry a lot of cash. The amount had to
be paid in full, however, Diner’s Club allowed
its cardholders up to 60 days to make the payments
for their purchases.
These first cards were designed to lend money
and then be paid off in full each month. The first
“revolving” credit card was offered
by the Bank of America. This card was called the
BankAmericard and was first marketed in the state
of California. People were now able to borrow
money and pay it back in small monthly payments.
By the mid-1960s the process of issuing and processing
credit cards had become too much for the banks
to handle by themselves, as a result, bank card
and credit card associations began to emerge.
The most prominent among these credit card organizations
were the InterLink Association and the Western
States Bank Card Association.
In 1970, Bank of America gave up control of the
BankAmericard program. BankAmericard issuer banks
took control of the program, creating National
BankAmericard Inc. (NBI), which would be in charge
of managing, promoting and developing the BankAmericard
system. In 1977 BankAmericard became the Visa
The success of the two largest credit card networks
– MasterCard and Visa – is critically
dependent on the membership of thousands of financial
institutions that jointly establish rules, standards,
and interchange fees.