History of the Credit Card
The history of the credit card in the United States dates back a few years before World War I. Departmental stores all over the country started to give out small, round metal plates to their most loyal customers. The first credit cards that all merchants across the country accepted were gas credit cards.
The increasing movement of people is one of the fundamental reasons behind the popularity of credit cards. Back then a merchant might not have accepted a personal check from tourists but would readily accept payment through American Express.
The history of the credit card continues with the arrival of World War II. Shopping and travelling was limited and government control on credit cards was enforced. This was when the Diner’s Club came into being (1950). Francis McNamara was an operator at a small loan company in New York City. He met a man who had several departmental credit cards racked up that he lent out to his friends at some fees. This man loaned out money from McNamara’s operation and paid off the credit card debt with it.
As one would expect, one of the man’s associates failed to pay the charged amount and McNamara was left with uncollectible debt. McNamara was discussing this pressing issue with his lawyer over lunch when an idea hit him. What if there was a credit card that could be used at different merchant’s outlets? Thus, the Diner’s Club was formed – an important hallmark in the history of the credit card.
McNamara went ahead and started issuing credit cards with an annual fee of $5. From these humble beginnings, the Diner’s Club became the first credit card in the United States that could be used for more than just gas and oil.
In the year 1951, Franklin National Bank of New York and the Bank of America in San Francisco started issuing their own cards. Bank of America’s card was called BankAmericard which has evolved into the popular Visa card. Similarly, American Express started its very own credit card program in 1958 when they noticed how profitable the Diner’s Club had become.
The next big step in the history of the credit card in the United States was that all of these new card issuers realized that in order to remain profitable they needed to acquire more customers. Therefore, by the end of the 1960s banks started sending credit cards to everyone they could via mail.
As credit card use became more and more popular so did credit card fraud and mail theft. Credit card companies continued to send credit cards to customers. Customers had no idea that they had a credit card account until they received their credit statements with an insanely large bill at the end of the month. The Fair Credit Billing Act of 1974 was passed to protect customers.
The history of the credit card gives us an insight on how far credit cards have come.