Wednesday, June 3, 2009

Credit Card History Evolution

In this post, I will discuss about the evolution, history and the very first credit card usage and facts. This is not about the credit card expenditure history but in case you want to have your credit history, visit this post of mine about free credit report without a credit card.

So let us start now with the credit card history and useful information.

The 18th Century Credit Card History

Have you ever stopped to think about the evolution of your credit card? This introduced the idea that people who couldn’t afford to buy “big-ticket” items could make regular payments until the full cost of the items were paid.

First Credit Card Users/Creators

Western Union, with their goal of providing good customer service, give away some of their more prominent clients a kind of metal card to be used in deferring payments – interest free – on services used. The year was 1914; the system or the card itself is called “Metal Money”.
Ford Motor Company also take part in creating the consumer credit business. In the late 1930’s, American Telephone and Telegraph or AT&T created the “Bell System Credit Card.” Other industries followed – railroads and airlines introduced same type of cards. From there, the system grows fast rapidly.

Here is an excerpt of the history from website.

The Credit Card Evolution

After seeing these trends of increased travel and spending among those who held charge cards, banks became interested in credit cards and online banking.
Since they were in the business of lending money, they saw the potential of gaining income by charging interest on credit cards.

1950 marked the real beginning of the credit card most of us are familiar with today. Diner’s Club, Inc. introduced the first credit card that could be used at a variety of stores and businesses. Merchants were eager to accept the card because they found that credit card customers usually spent more if they were able to “charge it”.

The first bank to implement this system was the Franklin National Bank in New York. In 1951, after screening applicants, they issued the Charge-It card to those approved for credit. This card could be used by consumers at local retail establishments. It worked much like the credit card systems of today – the consumer made a purchase using the card; the retailer obtained authorization from Biggins Bank, and closed the sale.

Other banks saw the same potential. The credit card industry was booming! Charge card issuing and processing became too large of a task for the banking industry to handle. In 1966, fourteen US banks had formed Interlink, an association with the ability to exchange information on credit card transactions. In 1967, four California banks had formed the Western States Bancard Association and introduced the MasterCharge program to compete with the BankAmericard Program. By 1969, most independent bank charge cards had been converted over to either BankAmericard or Master Charge cards.

As the bankcard industry grew, banks interested in issuing cards became members of either BankAmericard or MasterCharge. Their members shared card program costs, making the bankcard program available to even small financial institutions.

By the mid 1970s, the credit card industry started exploring international waters. In 1979, with the improvement of electronic processing, electronic dial-up terminals and magnetic stripes on the back of credit cards allowed retailers to swipe the customer’s credit card through the dial-up terminal, which accessed issuing bank cardholder information. It also decreased credit card fraud.

There we have it. The credit card history and evolution. Hope I have given you some insights about those plastic cards that used to be a metal one. If you want to correct something or contribute in this post, please leave it on the comment section.


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