These days, most of us have a credit card tucked away in our purse or wallet. Some of us probably even have a lot more than one. Now, with so many different credit card types on the market, offering things from cashback rewards to air miles, they have become so much more than just a convenient way to pay. But credit cards haven’t always been available, so when did it all begin?
Though the credit card itself didn’t come about till the 20th century, the concept of credit has been around for a very long time.
The first recorded use dates back almost 3,000 years, to civilizations in ancient Egypt and Babylon, where merchants would allow customers to pay for an item at a later date if they didn’t have the means to pay then and there, after making a note of the due payments. Fast forward to the mid 1900’s and in the US, oil companies, as well as local department stores and petrol stations, had a similar system, creating charge accounts which could be accessed using a card for their customers in an effort to create customer loyalty. It is from this system that the first credit card stemmed from.
The Charg-It Card
The ‘Charg-It’ card is often considered as the world’s first actual credit card and was a concept thought up by Brooklyn banker, John Biggins back in 1946. The idea was that when a customer made a purchase, the bank would pay and the customer would be sent the bill later. It wasn’t without its catches though. The card could only be used to make purchases locally and unsurprisingly was only available to those customers who had a bank account at Biggins’ own bank.
Three years later, in 1949, a new credit card was developed with a rather fanciful tale behind its creation. The story goes, that Frank McNamara, the head of the Hamilton Credit Corporation was out for dinner at New York’s Major’s Cabin Grill along with his attorney and a man named Alfred Bloomingdale, the grandson of the founder of the famous store Bloomingdale’s. A discussion arose regarding one of McNamara’s problem customers who had borrowed money and was unable to pay it back in a short space of time. Embarrassingly, shortly after this conversation had ended, McNamara realised that he had forgotten his wallet and had no way of paying for the meal. He had to phone and tell his wife to come to the restaurant with some money from home.
The Diners Club Card
With thoughts of the problem customer still on his mind, and vowing never to be stuck in this situation again, McNamara came up with the concept of a credit card that could be used to pay at multiple locations. The three men present at the dinner, then got together some money and started a company called The Diners Club. The Diners Club Card saw a step away from individual companies offering their own credit to customers as previously seen and gave customers the chance to pay using one card across many different companies.
At first, the card was only used by a select few at a small selection of restaurants and entertainment venues (hence the name Diner Card) but by the end of its first year, it had spread with over 20,000 people using the card.
Again it was not without its catches. Customers didn’t pay interest, however they were charged an annual fee for using the card and had to pay their bills back in full at the end of each month. Also, companies that accepted the Diners Card, were charged 7% on each transaction made with it.
It wasn’t until 1958 that The Diners Card saw real competition in the form of American Express. American Express as a company had existed for a long time before this date, but it wasn’t until then that they turned their attention to credit cards. It was a year later that the company introduced the first ever plastic credit card that we are now so used to seeing. Up until then cards were made of paper or cardboard. In its first five years, American Express could boast over one million card users across approximately 85,000 establishments and soon became used worldwide. Similar to the Diners Club Card, the early American Express cards required users to pay back their bills in full at the end of each month and it wasn’t until 1987 that the company allowed users to pay across a longer period of time.
Though this put customers at the risk of getting themselves into debt, when used sensibly, it provided customers with more flexibility with their money, which is what we enjoy today.