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A Brief History About Credit Cards

Jonathan Mark Kenoyer, an American archaeologist and professor of Anthropology says that the theory of valueless instrument to denote banking transactions go back 5,000 years back. The Mesopotamians then used clay tablets to trade with the civilization of Harappa. Coming up to 1800’s to the period of America circa, the traders made use of charge plates and credit coins to the ranchers and farmers so they could pay their bill once they managed to sell their cattle or harvest their crops.

A more advanced version of credit card was in 1900s when some oil companies and departmental stores in United Stated issued proprietary cards which can be said to be what is known as the store cards of present day. These proprietary cards were accepted only in the stores of the issued store and were to promote customer loyalty rather than the convenience of the customers or the store.

Later, in 1946 a banker by the name of John Biggins from Brooklyn launched the Charg-It card. The purchases from these cards were sent to Biggins’ bank the intermediary who reimbursed the trader and got payment from the customer – this was known as the ‘closed-loop system’.

All purchases were confined to local and only the customers of the bank would be able to get a Charg-It card.

After 5 years, Franklin National Banl of New York issued a charge card to one of their loan customers. After the war there quickly emerged more cards – entertainment charge cards and two dining cards.

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The Diner’s Club Card was the result of a discovery made by Frank McNamara in 1950 when he forgot his wallet at Major’s Cabin Grill, New York while he was attending a business dinner. He along with his business partner Ralph Schneider came back to the restaurant with proposal of Diner’s Club Card. The card is used basically for entertainment and travel only and this card quickly became quite popular gaining 20,000 members within a year. The purchases could be made in credit but it was a charge card so the full bill had to be paid on the set date of each month.

Launched in 1958, the American Express card had an entirely different origin. American Express was established in 1850 and was a competitor to United States Postal Service. American Express introduced money orders in 1882 and in 1891 they also introduced travellers cheque. They came up with the concept of travel charge card in 1946 but the though did not shape out quickly and Diner Club got the recognition in 1950.

However, the company had its own milestones to add and in 1959 became the first company to issue a plastic card which replaced the celluloid and cardboard. Five years and American Express had 1 million card users both foreign and domestic.

Soon some of the leading banks would issue their own consumer cards but with something new. The users wouldn’t have to settle their bills in full every month but they would be able to move ahead their balance credit with a certain charge on it.

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Year 1958, Bank of America was the first who started sending unsolicited BankAmericard credit cards to California markets. By 1966, the BankAmericard was national and also became America’s first licensed credit card. This card would come to be known as Visa later when it gained international presence.

In the same year of 1966 some banks in California got together to form the Interbank Card Association (ITC) which became the next most famous card in United States – MasterCard which is known as Mastercard Worldwide presently.

Visa and MasterCard both were backed by influential board members.

The card associations functioned in an ‘open-loop system’ where the inter-bank support and transfer of funds was compulsory. Earlier the banks were obligated to select between MasterCard and Visa association but later the regulations were bent which let the banks join both the associations so their customers could have both Visa and MasterCard.

Would you like to read more about this topic? This book might interest you: Credit Card Risks Crash Course.

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