How the First Credit Card Came to Be
In America, credit card history isn’t something most people think about. This is because credit and credit cards appear to be a timeless method of payment. However, the ubiquitous plastic we now enjoy is more or less a luxury of the latter half of the 20th century. At the dawn of the 20th century, there wasn’t much of a system or practice to credit, at all. Today, however, most habitually rely on the convenient use of plastic to secure a variety of services and items. How did credit become so prevalent, and who invented the first credit card?
Early Systems of Credit
During the 1920’s, the use of credit was regularly practiced in both the hotel, as well as the oil industries who commonly extended credit to their fondest customers. This practice then allowed patrons to pay for purchases or services later. Initially, credit was offered directly from merchants to their consumers who, in turn, also directly repaid their debts back to the original merchant.
Mimicking the success of hotels and oil companies, stores eventually began offering credit to attract new customers and as a way of boosting existing customer loyalty. As a new credit concept began to grow in popularity with consumers, merchants formed groups based on agreements to do business with consumers by accepting credit purchases on cards from other stores within their group. This joining of forces gave consumers the luxury of shopping at a wide range of stores, while keeping the same agreement they had with the original merchant.
Early Charge Cards
John Briggins later created the charge card when he introduced the “Charge-It” program in the mid-1940s, which permitted merchants to directly deposit sales slips at their bank and, in turn, the bank would then bill that merchant’s credit customers. Just a few short years after that, the Diner’s Club card was introduced, which allowed customers to enjoy dining at their choice of 27 restaurants throughout New York, but pay their bill later. Though the “Charge It” method, and the Diner’s Club agreements share roles in the foundations of the modern system of credit, neither are considered true credit programs. At that time, customers had to pay the entire amount due at each billing. Obviously, this differs from the installment payments that credit card companies accept today. This affords consumers the ability to carry balances over several months. Each of these early programs, though, has its place in the invention of true credit cards, as these programs are the conceptual foundations upon which today’s credit system was eventually created.
American Express and Bank of America Take Credit to New Heights
In 1958, American Express offered their premier charge card with Bank of America debuting the Bankamericard later that year. Soon after this the Bankamericard was re-named as the Visa card and is actually the first credit card to be almost universally used by consumers and accepted by merchants across America, as well as other countries.
Credit Cards Then and Now
Recalling the invention of the credit card unveils a perfect illustration of how rapidly strong business ideas will spread and transform how business is done worldwide. In a very short time period, the credit card has grown into a popular and convenient tool routinely used in the marketplace. Understanding their purpose and how they came into being, helps in respecting how they are used today.
