The History of Credit Cards

Posted by CardOffers.com Staff | September 8th, 2009 | General Information

While the extension of credit has been around for centuries, the credit card itself is a fairly recent development. These simple but effective financial tools have an interesting history that most users never stop to consider. Here are some facts about the creation and evolution of credit cards over the years.

While there is some difference of opinion, it is generally conceded that the first credit card deals came about during the latter part of the 19th century. These early credit devices took several forms, including what is normally considered the forerunner of the modern credit card: the charge plate. Various merchants, especially large department stores, issued cards of this type – usually a slim metal card with embossed information to identify the customer.

As the 20th century dawned, other types of merchants began to issue these new charge plates. For the most part, they were proprietary financial tools that could only be used with a specific vendor. This approach often helped to build customer loyalty to a specific brand, since it was much easier to charge items and pay for them later than to buy them and pay on the spot.

It was toward the middle of the 20th century that the first bank issued credit card deal came about. Issued in 1946 by John Biggins, a banker located in Brooklyn, New York, cardholders could present the card to participating merchants, who would process the payment in a manner very similar to that of a check. The bank in turn paid the balance in full to the merchant, and then allowed the bank customer to repay the debt according to the terms associated with the account. While limited in scope, this process laid the foundation for the development of the credit card industry.

Credit cards that could be used with many different merchants in many different locations began to appear in the late 1940s. The Diners Club is generally considered the first card of this type. Still limited to select venues, the card carried the provision that users had to pay the balance in full at the end of the month, when an itemized invoice was presented to the customer.

American Express was the next provider to introduce a credit card plan. Like the Diners Club card, the American Express credit card required that the balance be paid in full each month. This model is still common with American Express today, although they now offer several alternatives that allow cardholders to pay charges over time.

Many people today are unaware that Bank of America created a general-purpose credit card that is still in use today. Originally dubbed the BankAmericard, this credit card option was launched in 1966. Today, millions of people make use of this card, which is now issued by many different banks and is known as Visa.

Also in 1966, the InterBank Card Association came into being and began to issue a general-purpose credit card known as MasterCard. This card option remains one of the most popular choices of consumers today, and is available from many different banking institutions.

A more recent addition to credit card options is the Discover Card. Like American Express and Diners Club, Discover is what is known as a closed-loop credit option. That is, cards of this type do not make use of the interbank communications and funds transfers that earmark the open-loop structure of Visa and MasterCard. First issued in 1986, Discover has become the card of choice for many consumers.

Today, consumers have several options when it comes to choosing the best credit card for their needs. All of the major credit card companies offer their own set of benefits to help draw customers to their programs. It is important for consumers to read credit card reviews and research credit card details, such as interest rates and rewards programs, in order to find the credit card that is the best fit for them.

Tags: Credit Card History, History of Credit Cards, the charge plate
Filed under: General Information |

One Response to “The History of Credit Cards”

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