History of Credit Cards
Credit card is a method of making payment for the goods purchased or services availed without exchanging any cash. There are numerous credit card companies operating now around the world. Every credit card has a unique identification number which helps to speed up the shopping transaction.
The first use of credit cards in Europe is dated back to the nineteenth century. In the United States, the use of credit cards began in the early part of the 20th century, when oil companies and some department stores brought out their proprietary cards. These cards could be used only for the transactions between the merchant issuing the credit card and the merchant’s customer. It served as a means to create customer loyalty. These cards were available in limited locations.
The first credit card issued by a bank was known as Charge-It. It was issued in 1946 by a Brooklyn based banker named John Biggins. Any customer of the bank could use the card to make purchases and the bills were sent to that bank. The bank would pay for the expenses, and later recover the amount from the cardholder. There were some pre-conditions, like the cardholder needed to have an account with the bank, and all the purchases had to be made locally only.
Then came the Diners Club Card in 1950. It is claimed to be the first credit card that was most popularly used. It was developed by Frank McNamara, who was the founder of Diners Club. It was used for making payments for restaurant bills. It enabled its customers to eat in those restaurants that would accept credit cards of Diners Club, without the need of having to pay any cash. Diners Club used to pay the bill of the restaurant and the holder of the card would pay Diners Club afterward. Diners Club Card was often termed as ‘charge card’, as the full payment of the bill had to be made at the end of every month.
In 1959, American Express came up with its first credit card. It was the first card that was made up of plastic. Earlier, the cards were made up of either celluloid or cardboard. It also started local currency credit cards, that could be used outside the United States. In 1966, the Bank of America introduced the brand of BankAmericard, a general-purpose card which is presently known as Visa. In the same year, InterBank Card Association was created by a group of credit-issuing banks. This organization formed a national credit card system which at present is called MasterCard. Visa and MasterCard are direct competitors at present.
In the late 70s, the use of credit cards became easier due to improvement in the electronic processing system. Just by swiping the magnetic strip of customer’s credit card through a dial-up terminal, the retailer could access all the information regarding the cardholder. Thus, the processing authorizations could be done in a few minutes time. It also reduced the possibility of credit card fraud.
Thus, we have come to know that credit cards are in use for the last half-century, and it will continue to remain popular for many more years to come. Recently, several other forms of payments like online internet services, etc., have developed. However, about ninety percent of the e-commerce transactions are still carried out through credit cards only.