The Development and Evolution of Credit Cards

The origins of credit cards trace back to the early 20th century, with their eventual emergence and growth significantly impacting modern finance and commerce. This article delves into the pivotal moments and innovations in the development of credit cards, highlighting key milestones that led to their ubiquitous use today.

Origins and Early Forms

The early 1900s marked the beginning of credit as a recognized payment method. The concept started with charge coins issued around 1865, which allowed customers to make purchases at specific outlets, often with an account number stamped on them. These coins were later replaced by more versatile and durable materials like celluloid, copper, and aluminum. Over time, charge coins were utilized not only for purchases but also at hotels, vehicle services, hardware shops, and women's shoe stores, remaining in use into the 1940s.

Charge and Credit Coupon Systems

In the early 1900s, other formats emerged, including Western Union paper business-card-like cards for preferred customers and staff to send telegrams from any office. This was followed by General Petroleum's use of embossed metal plates in 1924, which could be duplicated to create a paper trail. These were known as charga-plates.

Bank- Issued Credit Cards

In 1946, John Biggins' Flatbush National Bank of Brooklyn launched the first bank-issued card called Charg-It, which was only valid within a two-block radius of the bank. In 1950, Diners Club introduced the first credit card allowing use at multiple different stores and restaurants. This was a significant advancement, opening the door for greater flexibility and convenience. Diners Club's corporate lore roots back to a memorable incident in 1949 when Frank McNamara, while entertaining clients at a restaurant, forgot his wallet. His wife settled the bill, which sparked the idea for a card.

The same year, American Express entered the scene with embossed plastic cards, a practice they started in 1959.

The Emergence of Travel and Entertainment Cards

Diners Club, Visa, and MasterCard became prominent in the 1950s and 1960s. By 1953, Diners Club cards were widely accepted in Canada, Cuba, and Mexico. The real boom in the credit card market began in 1960 with Bank of America's Bank Americard, which was licensed to other banks from 1966 onwards. It later became Visa in 1977. This was followed by various oil companies, which sent unsolicited charge cards in the mail. These practices were later outlawed due to non-payment issues.

In 1966, Barclays Bank became the first bank in England with the Barclay Card, and in 1967, a coalition of California banks launched the Master Charge card, later known as MasterCard since 1979.

The Technological Shift

The evolution of credit cards continued with the introduction of plastic embossed cards, followed by more durable and secure materials. Over time, the combination of charge, credit, and debit cards began to replace cheques as a primary payment method, further evolving through internet banking and mobile payments.

Despite their widespread adoption in developed economies, credit cards have struggled to gain traction in many developing countries. This is often due to limited acceptance, high fees, and the rise of mobile money and online lending.

Conclusion

From charge coins to modern plastic cards, the journey of credit cards reflects a series of technological and social advancements that fundamentally changed how we transact and manage our finances. As we continue to see innovations in digital payments, credit cards will likely retain their importance, albeit shifting into new forms and applications.