Discover Credit Card History

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

According to Encyclopedia Britannica, "the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers." However, references to credit cards have been made as far back as 1890 in Europe.

At the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It only about 50 years later that plastic payments as we know them today became a way of life.

Early Beginning of Credit Card
In the early 1900s, oil companies and department stories issued their own proprietary cards, such cards were accepted only at the business that issued the card and in limited locations. These cards were developed as a means of creating customer loyalty and improving customer service, while today credit cards are mainly used for convenience.

The first bank card, named "Charg-It," was introduced in 1946 by John Biggins, a banker in Brooklyn. It is almost similar with today credit card function but purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins' bank. In 1951, the first bank credit card appeared in New York's Franklin National Bank for loan customers. It also could be used only by the bank's account holders.

The first credit card idea was began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he was forgotten to bring his wallet. He managed to pay the bill, but he decided there should be an alternative to cash. The small, cardboard card was invented then, named as Diners Club Card and used mainly for travel and entertainment purposes. It claims the title of the first credit card in widespread use.

Who Invented the Plastic Card?
By 1960's, Diners Club card was replaced with plastic. Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month.

American Express was formed in 1850 and in 1958 the company emerged into the credit card industry with its own product, a purple charge card for travel and entertainment expenses. Bank of America issued the BankAmericard (now Visa) bank credit card later in 1958. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid).

The Popularity of Credit Cards
Credit cards were first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. American Express and MasterCard became huge successes overnight. Today, the credit card industry is a nearly one trillion-dollar money machine.

A blessing or a curse?
Some call it a blessing as people can borrow money so easily and help to the purchase consumer goods and services no matter what their income. Others may call it a curse as millions of people currently living beyond their means, falling into deep debt and finally facing bankruptcy.

The Future
While the plastic card has been the standard for a half century, recent developments show alternative forms of payment rising to prominence, from online services such as PayPal to credit card keyfobs to chips that can be implanted into cell phones or other devices even in our body.

But with the sheer volume of devices in use around globe especially developed nations whose sole purpose is to read a flat piece of plastic with a magnetic stripe, the "card" in "credit card" is unlikely to pass from the scene any time soon.