The Raise Of Plastic – A Brief History Of Credit Cards

The Raise Of Plastic A Brief History Of Credit Cards

It shouldn't come as surprise to anyone that the concept of credit can be traced back to ancient times. From the very beginning trading required certain financial instruments and conventions which proved to be pivotal to its success. Apart from the commonly recognised currency and demand for products, what the ancient merchants also needed was the acquisition of new markets and retention of their clientele. Simply put, they needed other sellers to buy from them constantly. What if the customer base became suddenly high and dry? How could they secure a transaction without immediate exchange of goods and currency? They could sell now and ask for the money later. The idea of selling on credit was born.

This clever trick proved to be so successful with the sellers that it remained the basis of the international trade throughout the centuries in almost unchanged form. There were some problems involved. First of all it didn't make life easier for the merchants as the nature of transaction bear an extra administrative burden on them. Bulky ledgers had to be kept and the sales were only made directly between the merchants with no third parties involved. It wasn't until the beginning of 1900 when some first attempts at issuing cards were made.

The modern credit card was the successor of a variety of merchant credit schemes. In the 1920s some American companies started to charge fuel cards to a growing number of automobile owners with Western Union leading the way. By 1938 several companies started to accept each other's cards which very often took a form of credit tokens made from metal coins, metal plates or celluloid.

The first bank card, named "Charge-It," was introduced in 1946 by John Biggins, a Brooklyn banker. Biggins invented the "Charge-It" program between bank customers and local merchants. Merchants could deposit sales slips into the bank and the bank billed the customer who used the card. There were some catches to this programme: purchases could only be made locally, and Charge-It cardholders had to have an account at Biggins' bank.

According to Diners Club, in 1949 a man named Frank McNamara had a business dinner in one of New York restaurants. When the bill arrived, Frank realised he had forgotten his wallet. This awkward situation led him to a sudden idea: if a customer could eat without cash at any restaurant that would accept a credit card then the issuer would pay the restaurant and the credit card holder would repay the issuer in return. By 1951 Frank's brainwave secured Diners' Club 20,000 cardholders.

What followed next can be described as the era of many improvements and adjustments to what was already a great innovation. In1959, American Express introduced the first card made of plastic. The mid-60s saw the formation of a national credit card system when a group of credit-issuing banks joined together and created the InterBank Card Association. In 1966 the first credit card outside of the US was launched in the UK. Other important changes worth mentioning were: 0 credit cards which allowed cardholders to move their debt from card to card and avoid paying any interest on it and the introduction of Chip and PIN technology which has cut card fraud substantially.

Credit cards have changed dramatically over the last 60 years, and will undoubtedly continue to evolve as further technology is developed. We've already seen some alternative forms of payment rising to prominence, from online services such as PayPal to credit card key fobs which might pose a threat to credit card industry. If we take into account the number of devices in operation around the world whose sole purpose is to read a flat piece of plastic with a magnetic stripe it seems unlikely that the credit card will pass from the use any time soon.

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