Learning the History of Credit Cards

When credit has become an important part of our modern, daily lives, knowing the history of credit cards can be a wonderful way of looking back at how our plastic cards have changed the way the world spends money. Can you even imagine a life without credit cards? Perhaps not. But credit has its roots way back in the ancient civilizations where goods or services are offered in exchange of another. With the speed of human advancement comes the speed of exchanging goods and services. Learning the history of credit cards will surely give you an insight on how a simple demand for convenience had reshaped the way we spend for our needs today.

Although credit cards had its roots in America, references have been made to it as early as the year 1890’s in Europe when credit coins or plastics were as good as currencies. In the early 20’s in United States, cash and checks were popular back then as a way of buying goods and services. Promissory notes were used for making purchases now and paying for it later. Much earlier than that, department stores and oil companies have been using proprietary cards that act as an efficient way of making payments in certain places. This had been used to create repeat transactions and to gain customer loyalty.

History of Credit Cards: The Origins

Many had thought that Visa or Mastercard were among the first in the credit card industry. Not even close. Diners Club is the world’s first, which was born out of a dinner party incident in 1950, when Frank X. McNamara ( the head of Hamilton Credit Corporation ) had forgotten his wallet. This embarrassing experience had given him the inspiration of creating the first credit card made of a cardboard, which can be used anywhere conveniently, without having a need to carry cash. The idea of convenient cashless transaction had been first introduced by John Biggins ( Flatbush National Bank, Brooklyn ) in 1946 with the first bank card called Charge-It. Customers pay using the bank card and the bills are forwarded to the bank. The bank then gets the payment from its depositors’ accounts and forward it to the merchants.

History of Credit Cards: The Birth of Plastic Cards

Carrying piles of cardboards had become bothersome to many and thus, the credit card had been subjected to a makeover. A decade after the Discover credit card was born, it was changed into a plastic form. But it was American Express who had created the first plastic credit cards which were initially offered for travel and entertainment purchases. With this evolution came the Buy Now, Pay Later scheme where customers didn’t have to pay for the full credit amount, where they were required to make small payments and interest rates were applied on their loans.

History of Credit Cards: Bank Card Associations

In the year 1966, the Bank of America established a group of credit-card issuers and banks to introduce the first multipurpose credit card. There were restrictions set and yet, the group expanded its operation, bringing convenience to many people across the states. With this growth comes complications and in the end, a separate working body is formed under the Visa Network.

History of Credit Cards: The Birth of Two Credit Card Giants

Because of the growing demand for convenience of use and cashless spending, two giants were born: Visa and Mastercard. They had merged with many member banks and acted as a third party bridging the gap between large banks and consumers. Visa started as a small bank in Fresno, California in the late 50’s and Mastercard started in the late 60’s. Mastercard is the first interbank card, which was originally called as Master Charge. Visa had become as synonymous with the word credit card itself and was publicly listed in the NYSE ( New York Stock Exchange ) on year 2008 with V as its ticker symbol. Mastercard, on the other hand, is the first to have introduced card hologram security on their credit cards and this giant had been listed in the NYSE with MA as its ticker symbol.

History of Credit Cards: A Modern-Day Nemesis

With the wide use of credit cards comes the wide abuses of many credit card firms and for this, the Fair Credit Billing Act of 1974 was introduced. Shady practices on a credit card’s high interest rate, unlawful penalties, and extra charges were becoming major concerns. Because of this, amendments were made which called for transparencies of charges issued to the credit card holder. This also works with billing disputes on charges not made by the credit card owner. If ever billing error arises, you need to write to your credit card company at an address specially created for billing inquiries and make sure to send the letter within 60 days. Also, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 shall protect customers from high interest rates, where the credit card issuers are required to mail billing statements 21 days before due date. They are also mandated to apply your payment to the one with the highest interest rates first.

The history of credit cards truly reflects the conscious human demand for speed of service and convenience. With the rise of credit cards also come the advent of shopaholics and bad spending habits. Credit cards make shopping for goods and services so easy that many have completely ignored the risks of buying things now with tomorrow’s money. Credit cards may have put cash spending valueless… and the addiction goes on.

RESOURCES:

Beattie, Andrew. “ How Credit Cards Built a Plastic Empire. “ 2009. Investopedia, ULC.
http://www.investopedia.com/articles/financial-theory/08/history-credit-cards.asp?viewed=1

Bellis, Mary. “ Who Invented Credit Cards? “ 2009. About.com.
http://inventors.about.com/od/cstartinventions/a/credit_cards.htm

Gerson, Emily Starbuck. Woolsey, Ben. “ The History of Credit Cards. “ 2009. Credit Cards.com.
http://www.creditcards.com/credit-card-news/credit-cards-history-1264.php

Federal Trade Commission. “ Fair Credit Billing. “ August 1999 ( Modified: April 2009 ).
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre16.shtm