How the First Credit Card Came to Be
In America, credit card history isn’t something most people think about. This is because credit, and thus credit cards, seem to be a timeless method of payment. However, the use of plastic payments is, for the most part, a twentieth century luxury. At the dawn of the 20th century, there wasn’t much of a system or practice to credit, at all. Today, most rely on the convenience of plastic for a numerous goods and services. So, how exactly did the phenomenon known as credit spread so rapidly and who is the person responsible for inventing the first credit card?
Early Systems of Credit
During the 1920’s, the use of credit was regularly practiced in both the hotel, as well as the oil industries who commonly extended credit to their fondest customers. This practice then allowed patrons to pay for purchases or services later. Credit was first offered only from merchant to customer, who had to repay their debts directly with the original merchant.
Mimicking the success of hotels and oil companies, stores eventually began offering credit to attract new customers and as a way of boosting existing customer loyalty. As a new credit concept began to grow in popularity with consumers, merchants formed groups based on agreements to do business with consumers by accepting credit purchases on cards from other stores within their group. This alliance allowed customers the luxury of shopping at a wider number of stores while using the same agreement they enjoyed with the original merchant.
Early Charge Cards
John Briggins later created the charge card when he introduced the “Charge-It” program in the mid-1940s, which permitted merchants to directly deposit sales slips at their bank and, in turn, the bank would then bill that merchant’s credit customers. Just a few short years after that, the Diner’s Club card was introduced, which allowed customers to enjoy dining at their choice of 27 restaurants throughout New York, but pay their bill later. Though the “Charge It” method, and the Diner’s Club agreements share roles in the foundations of the modern system of credit, neither are considered true credit programs. This is because, at that time, customers were bound to paying the whole amount due at each billing. Obviously, this differs from the installment payments that credit card companies accept today. Such affords customers the opportunity to carry balances over several months. Each of these early programs has it’s place in the formation of true credit cards, as they are the conceptual foundations on which the modern credit system is built upon.
American Express and Bank of America Take Credit to New Heights
In 1958, American Express offered their premier charge card with Bank of America debuting the Bankamericard later that year. Soon after this the Bankamericard was re-named as the Visa card and is actually the first credit card to be almost universally used by consumers and accepted by merchants across America, as well as other countries.
Credit Cards Then and Now
Recalling the invention of the credit card unveils a perfect illustration of how rapidly strong business ideas will spread and transform how business is done worldwide. In a very short time period, the credit card has grown into a popular and convenient tool routinely used in the marketplace. Understanding their purpose and how they came into being, helps in respecting how they are used today.
