A large majority of people use credit cards for making daily purchases, paying bills, and transferring money. But have you ever stopped to think about how this extremely convenient, pocket-sized tool came to be?
The origins of the physical credit card date back to 1950. A New York executive refined the idea of a handy financial instrument that multiple retailers could accept.
Like all game-changing creations, the modern credit card has a colorful past. Read on to learn more about the history of the credit card, its earlier forms, and how it came to be what we use today.
History of credit cards
In the 1920s, the American economy was booming. Oil companies and department stores were beginning to offer customers “courtesy charges” that they could use to make purchases. Cards were limited to individual stores since only the distributing retailer could accept the card.
Enter the Diners Club, first established by businessman Frank McNamara and his associate Ralph Schneider in 1950. McNamara took the idea of the purchase card and refined it. It sparked the modern banking card movement. Today, many refer to the Diners Club card as the original credit card.
McNamara wanted his cards to reach a large audience. His company charged businesses a seven percent transaction fee, promising cardholders a single monthly bill payment and a status symbol they could carry around (and show off).
By 1953, the Diners Club card was the first internationally accepted purchase card. Credit card competition didn’t start popping up until 1958, with each one offering consumers various incentives.
Early forms of credit cards
Payment systems, in their most archaic form, can be traced back to 1792 B.C. The Code of Hammurabi, used in Babylon (now modern-day Iraq), outlined rules for citizens to loan and pay back borrowed money.
More recently, the 1930s saw the exchange of metal tokens as a popular method to purchase goods from merchants. In the 1940s, cards exclusive to travel let users buy multiple airline tickets.
Then we have the Diners Club phenomenon of the early 1950s and all the imitations their charge card gave rise to. In place of the heavier metal tokens, the new Diners Club card was cardboard, much lighter,and easier to carry from place to place. It was American Express that created the first plastic card in 1959.
One important spin-off of McNamara’s design was the BankAmericard, developed by the Bank of America in 1958. It was considered the first card to operate using revolving credit and came with a $300 credit limit. (Today, that would be about $2,800.) Diners Club cardholders were required to pay off each monthly statement in full.
Notably, the Bank of America permitted out-of-state banks to issue the card, allowing it to reach a larger consumer population. The Bank of America took a major financial hit after distributing over 60,000 reactivated cards to California residents that year, generating state-wide fraud and credit delinquencies.
Despite this error, the Bank of America recovered over the years. The BankAmericard became what we now call Visa, which was officially formed in 1976.
Mastercard was also formed during the late 70s, beginning as the Interbank Card Association, or ICA, in California.
Eventually, card selection was based on the issuing company, like Visa, since not every merchant or business recognized each card type. This pattern of thinking came about in the 1970s and 80s.
The Discover card was created in 1986 and was one of the first cash-back cards, offering a small tax refund to users on each purchase they made. This inspired a flurry of rewards programs like frequent flier miles and low-interest rates.
As for the Diners Club card, it still exists today, although it circulates less frequently. Despite its name, the benefits center on travel instead of restaurants and dining. As of March 2021, it isn’t available in the United States.
Then, in 2014 the online wallet — and, by extension, the online credit card — was introduced by Apple.
The blend of "credit" and "card"
The marriage of “credit” and “card” didn’t occur until the 20th century. The notion of “carrying credit” as a physical object had already taken root.
Up until the 20th century, metal tokens branded with the name and logo of a certain merchant and an account number identified shoppers. This allowed them to apply their credit to the accepting stores.
After the 30s, these tokens evolved into rectangular cards, like a cross between a modern credit card and a military dog tag.
It wasn’t until the Diners Club came along that a marriage occurred between the two concepts. The first general purpose cards were born.
Rise of credit card technology
The emergence of the magnetic stripe in the 1960s allowed retailers to read the card directly instead of having to make imprints for their records. These days, the magnetic stripe is both read by machines and encrypted with data.
This feature complements the embedded computer chips and payment authentication processes, including the physical credit card terminal and, later, the PIN code.
Since the 1990s, card security has been a subject of much focus, and measures to prevent fraud have only increased.
Now that possibilities of identity or credit card theft or account hacking are higher than ever, surrounding yourself with tools to ensure your personal and financial safety is crucial.
An excellent tool for this is Point Card.
Purposefully designed as a transparent, easy-to-use alternative payment card, Point Card allows cardmembers to exercise monetary independence in spending their own money while also receiving exclusive benefits through unlimited cash-back and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases.
In addition, all users are protected by Point’s built-in safety features. This includes car rental and phone insurance, trip cancellation insurance, no interest rates, and fraud protection with zero liability. Cardholders can update their PIN and lock their card anytime they choose. These features allow you to rest easy knowing that you won’t have to worry about making unnecessary, costly payments and that you can save your money for what truly matters instead.
You work hard for your money, and Point will always work hard for you in return.
Looking ahead to the future, biometric confirmation, such as fingerprint scanning, is being discussed as an alternative way to confirm identity. Advanced digitization is a defining feature of our world now. Many people believe that credit cards will eventually become outdated, just as their predecessors were.
Point Card’s mobile app and the Apple Wallet allow you to access your cards anywhere — meaning this evolution is already beginning.
Made to spend.