The History of Credit Cards



    Just what is the history of credit cards? Those Discover, MasterCard and Visa cards seem to be an inescapable part of modern life. They are constantly featured in advertisements on billboards, in magazines, on the Internet, and on television.

    Furthermore, we are constantly bombarded with invitations to sign up for various cards, whether it is through our bank, favorite store, or completely independent entity.

    Credit cards have their pros and cons. On the one hand, using them is a way to build valuable credit, which increases one's chances of securing loans and being eligible to buy property or participate in certain programs.

    The main drawback, of course, is that the use of credit cards can lead to massive amounts of debt if the utmost care is not practiced. With these cards playing such a pervasive role in our culture today, it is hard to imagine a society without them.

    Yet, they were not always a payment option, and considering the longevity of human civilization, are a relatively new form of payment.

    The history of credit cards begins in the 1920s. Although the concept of credit was not entirely new (some local stores extended small credit lines to their loyal customers), it was in the 20s that the concept really took off.

    Companies and department stores began issuing "charge cards" primarily to please automobile owners who did not want to have to travel to their home bank every time they wished to make a purchase.

    Usually these charge cards could only be used at a limited number of locations and were used primarily to build customer loyalty, though they had the added benefit of enhanced convenience.

    It was not until the mid-1940s that the first bank card was released. However, its use was restricted to account holders at a specific bank, and it was only used in a limited capacity.

    The history of credit cards continues in the 1950s. The cardboard "Diners Club Card" became the first credit card to enjoy widespread use. Legend has it that in 1949 a businessman named Frank McNamara forgot his wallet one day for a luncheon. After barely talking his way out of the sticky situation, he decided that there should be an alternative method of payment to cash.

    The cardboard Diners Club Card took off, and by 1951, it was used by about 20,000 consumers.

    In the late 1950s came the emergence of the plastic cards that we associate with credit today. Both MasterCard and the predecessor to Visa cardsmade their debut at this time.

    Another important advancement in the history of credit cards was the introduction of the revolving balance system. Previously, cardholders were required to pay their full balance at the end of each month. With the revolving balance system, people were able to keep a balance on their Credit cards and pay it off as they saw fit.

    More and more banks began to issue credit cards, many under the MasterCard or Visa logo because those were well established systems.

    As technology has advanced, companies have been able to aggressively target customers that they think will carry high balances and not default.

    Many people have accused credit card companies of underhanded tactics to lure consumers in and keep them in debt; some have even called upon Congress to regulate these companies more stringently.

    However, the history of credit cards has come a long way and the convenience of credit cards ensures that they are unlikely to leave the scene anytime soon.

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