Credit cards are everywhere.
More than 75% of consumers in the United States have at least one credit card, and the average American has more than three.
What began as a simple method of making a purchase and paying for it later has evolved over a few decades into a worldwide network of digital payment processing that allows you easily make purchases online from anywhere in the world using your phone or computer.
With such a rapid evolution taking place over such a short amount of time, you might be wondering what the future of credit and debit cards will look like. But to predict the future, you need to understand the past.
When was the credit card first invented?
Credit payment systems date back more than 5,000 years when clay tablets served as monetary placeholders in Mesopotamia. Millenia later, in the late-19th and early-20th centuries, lenders and department stores used metal credit tokens and charge plates. The first credit card, however, is typically thought to have been invented in 1950, when Ralph Schneider and Frank McNamara founded the Diners Club. The Diners Club card was initially designed to pay for meals in restaurants, but it soon extended its reach to other services.
By 1953, it had become the first internationally accepted charge card and was accepted in Canada, Mexico, Cuba, and the United Kingdom.
However, the Diners Card wasn't exactly a credit card in the modern sense — it was a charge card requiring cardholders to pay off their entire balance every month.
The history of modern credit cards
Bank of America launched the first modern credit card — the BankAmericard — in 1958. It was the first credit card to offer revolving credit and came with a $500 credit limit, giving people the ability to carry a balance on their card from month to month. American Express Company issued its first travel and entertainment charge card the same year, launching the era of plastic cards.
In the 1960s, IBM engineer Forrest Parry invented the magnetic strip for CIA identification cards. In 1969, American Airlines became the first private company to embrace the invention with their Air Travel Card.
In 1970, BankAmericard became an incorporated interbank card association that focused on issuing and managing credit cards. In 1976, the company changed its name to Visa.
Three years later, the Interbank Card Association — founded in 1967 and rebranded as Master Charge in 1968 — changed its name to Mastercard.
It wasn't until 1986 that a subsidiary of Sears called the Dean Witter Financial Services Group, Inc. launched its Discover Card.
History of credit cards timeline
- 1946: John C. Biggins of Flatbush National Bank in Brooklyn, New York, introduces Charg-It, the first bank card.
- 1950: Diners Club issues the first-ever charge card.
- 1958: Bank of America issues the first general-purpose credit card with revolving credit.
- 1958: American Express issues its first charge card.
- 1968: President Lyndon B. Johnson signs the Truth in Lending Act into law.
- 1969: American Airlines adopts the magnetic strip on the Air Travel Card.
- 1970: The Fair Credit Reporting Act is established.
- 1974: The Equal Credit Opportunity Act becomes law.
- 1976: Bank of America creates Visa.
- 1979: The Interbank Card Association becomes Mastercard.
- 1986: Dean Witter Financial Services Group launches the Discover Card.
New security: EMV chips, contactless payment, virtual credit cards, mobile wallets
Credit card technology remained pretty much the same from the 1980s to the early 2000s, even as credit cards became increasingly popular.
However, credit card security has evolved in recent years, replacing magnetic stripes and signatures with EMV chips and PINs.
Contactless credit cards have also gained traction in the U.S. and beyond — particularly in response to the COVID-19 pandemic — as all major credit card issuers now offer contactless cards.
And with the rising popularity of smartphones, mobile payment apps like Google Wallet, Apple Pay, and Android Pay have emerged that don't require cards at all.
Likewise, virtual credit cards have become an increasingly popular way of making purchases online without using a physical card. Also known as digital credit cards, virtual credit cards allow users to protect their credit card information by using a unique proxy account number.
Rewards, airline miles, points, cash-back
Since American Airlines issued the Air Travel card — the first travel rewards card — in 1936, the idea of offering incentives to potential customers has grown exponentially.
Fifty years later, in 1986, Discover Card began its "cash back" program, which gave an amount back to the cardholder based on the total charges placed on the card during the year. Then in 1990, AT&T introduced the Universal Card, which offered cash-back on purchases that cardholders could use to pay their phone bill.
Nowadays, the abundance and variety of credit cards mean competition is at an all-time high. To stick out from the crowd, credit and debit card companies have begun offering generous loyalty rewards and cash-back programs to attract and retain customers. Airline miles, hotel points, cash-back, and other rewards have become the norm.
A new type of rewards card has also become increasingly popular in the past few years. Crypto cards let cardholders earn rewards in the form of bitcoin or other cryptocurrencies, depositing their rewards in their pre-existing crypto wallets.
One of the latest and most rewarding cash-back cards to hit the market is PointCard™.
A transparent, easy-to-use alternative payment card, PointCard allows you to spend your own money while also receiving exclusive benefits, including unlimited cash-back on all purchases and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases.
You also get fraud protection with zero liability, no interest rates, and rental car and phone insurance.
What is revolving credit?
Revolving credit — also known as rolling credit — lets you borrow funds, repay them, and then borrow them again on a revolving basis.
You're free to use as much (or as little) of the available funds as you want during your billing cycle. The total balance due on your account, minimum required payment, and applicable interest are only calculated on your borrowed amount.
If you pay your full balance on time at the end of the billing cycle, you won't have to pay any interest, and your credit limit returns to its original amount.
But if you only make the minimum payment (or any amount less than the full balance), you'll be charged interest on the balance that "revolves" into the next billing cycle. Your available credit limit will decrease by the amount you owe, including interest.
Pros of revolving credit
- Easy access money when you need it.
- Low borrowing costs (if you pay down your full balance every month)
Cons of revolving credit
- High interest on unpaid balances
- Annual fees
- Negative impact on credit score (if utilization rate goes above 30%)
What are the types of revolving credit?
- Credit cards
- Personal lines of credit
- Home equity lines of credit (HELOC)
- Business lines of credit
- Margin investment accounts
What is the future of credit cards?
As the credit card industry continues to evolve, three new technologies are just around the corner:
QR codes — or quick response codes — are already a popular way to pay for goods or services. Alongside mobile wallets, QR codes are likely to become much more common due to their speed and security.
We're also likely to see an increase in the use of voice command payment tools — like Amazon's Alexa — in places like retail stores and gas stations.
Many major credit card companies are already shifting to biometric cards, which combine fingerprint and chip technology to authenticate credit card transactions.
The bottom line
Even though credit cards as we know them have only been around for a few decades, there's no denying they're here to stay. And with technology evolving at breakneck speed, there are plenty of reasons to be excited about the future.
Made to spend.