If you were born after 1980 you probably take the existence of credit cards for granted. You’ve been seeing them in use your entire life. But in the larger scheme of things, they really are a recent development.
Credit cards were first issued by oil companies and department stores in the early 1900’s – to be used only at their own establishments. Rather than offers of long-term credit, these cardboard or metal cards were a convenience for customers who then paid the entire bill at month’s end. Thus they were really “charge cards” rather than “credit cards.”
1946 saw the first bank-issued charge card, restricted only to customers of John Biggin’s bank in Brooklyn, and good only at local business establishments. In 1951, New York’s Franklin National Bank issued a similar card for account holders only.
Diner’s Club was introduced in 1950, as a convenience for frequent travelers and entertainers. The first cards were issued to 200 select customers who could use it at 27 New York restaurants.
By the next year, cardholders numbered 20,000 and the card was more widely accepted. Diner’s Club claims the title of the first credit card in widespread use. This too was technically a charge card rather than a credit card, as the bills were due in full each month.
Meanwhile, Federal Express, which specialized in money orders and traveler’s checks, had been considering offering a similar card. When Diner’s Club was formed, American Express put their own plans into action and in 1958 launched their purple card for travel and entertainment. In 1959 they introduced the first card made of plastic. Again, this was technically a charge card.
The first revolving-credit card – the kind we take for granted today – was issued by the Bank of America, only in the State of California in 1959. By 1965, the bank saw the potential for more earnings, and began licensing the card to banks across the country. This was known as the BankAmericard Program.
Business was booming, so in 1967 four California banks had formed the Western states Bancard Association and introduced competition to the BankAmericard Program – the MasterCharge. By 1969, most independent bank charge cards had joined either the BankAmericard or MasterCharge programs.
Because these growing businesses wanted to expand into the international market, the name “America” was a problem. So in 1977, BankAmericard became Visa. In 1979 MasterCharge also changed its name, becoming MasterCard.
The credit card industry now has 5 major players:
– Visa International
– American Express
– Diner’s Club
Visa, the card that started the rush toward revolving credit, is still the leader, with over one billion cards in use and carrying more than half of all credit card transactions worldwide.