Credit Cards: A Brief History
- By:
- Catherine Brock | September 03, 2007
The concept of credit dates back some 3000 years. The credit card, as we know it today, dates back almost 60-a far more modern invention.
Who could forget Wimpy's "I'll gladly pay you Tuesday for a hamburger today?" For the past 70 years, the "Popeye" comic strip character has been subtly pushing the concept of credit. But it took far more than Wimpy's insatiable appetite for burgers to swing credit card usage into the mainstream.
Ancient civilizations are thought to have used "buy now, pay later" arrangements even before the inception of paper money. More recently, 18th and 19th century merchants were known to have offered credit to boost sales. There weren't any plastic cards in those days-merchants merely kept simplistic records of each customer's purchases and payments.
A businessman named Frank McNamara is largely attributed with taking the credit concept to the next level. As the story goes, he took a client to dinner and didn't realize he'd left his wallet at home until the bill arrived. The incident prompted him to wonder why a person who could afford to eat a restaurant meal should be limited by the cash in his wallet. In 1950, he took the question to his lawyer, Frank Schneider, and the two Franks came up with one very significant idea: the Diners Club.
Diners Club members could sign for their meals at participating restaurants, and settle their bills at a later date. Participating restaurants saw the program as a way to increase sales, and members liked the convenience of dining out without having to bring cash. Soon enough, the Diners Club became a huge success.
American Express and Bank of America built on the Diners Club idea by launching general-use credit cards in the late-1950s. American Express cardholders were required to pay their bills in full at the end of each month, but its competitor, the BankAmericard, offered revolving credit. Customers liked the option of rolling balances over from month to month, and were willing to pay interest charges for that convenience. Bank of America began forming agreements with other banks across the country so that the card would be more widely accepted. The BankAmericard was later renamed VISA.
Bank of America's competitors wanted a piece of the credit card pie as well. They formed MasterCharge in the 1960s, which later became MasterCard. VISA, MasterCard, and American Express continue to be the dominant players in the credit card industry.
A look back at the development of credit cards reminds us of the original intention of the product. When the two Franks established the Diners Club, they wanted to help consumers buy things now that they could afford, while paying for it later. Unfortunately, today's consumers often use their cards to buy things that they can't afford either now or later. Stick with the Diners Club vision, and only buy that hamburger today if you'll have the cash to pay for it on Tuesday.
Who could forget Wimpy's "I'll gladly pay you Tuesday for a hamburger today?" For the past 70 years, the "Popeye" comic strip character has been subtly pushing the concept of credit. But it took far more than Wimpy's insatiable appetite for burgers to swing credit card usage into the mainstream.
Buy now, pay later
Ancient civilizations are thought to have used "buy now, pay later" arrangements even before the inception of paper money. More recently, 18th and 19th century merchants were known to have offered credit to boost sales. There weren't any plastic cards in those days-merchants merely kept simplistic records of each customer's purchases and payments.
Solving the cash problem
A businessman named Frank McNamara is largely attributed with taking the credit concept to the next level. As the story goes, he took a client to dinner and didn't realize he'd left his wallet at home until the bill arrived. The incident prompted him to wonder why a person who could afford to eat a restaurant meal should be limited by the cash in his wallet. In 1950, he took the question to his lawyer, Frank Schneider, and the two Franks came up with one very significant idea: the Diners Club.
Diners Club members could sign for their meals at participating restaurants, and settle their bills at a later date. Participating restaurants saw the program as a way to increase sales, and members liked the convenience of dining out without having to bring cash. Soon enough, the Diners Club became a huge success.
Adding versatility to the credit equation
American Express and Bank of America built on the Diners Club idea by launching general-use credit cards in the late-1950s. American Express cardholders were required to pay their bills in full at the end of each month, but its competitor, the BankAmericard, offered revolving credit. Customers liked the option of rolling balances over from month to month, and were willing to pay interest charges for that convenience. Bank of America began forming agreements with other banks across the country so that the card would be more widely accepted. The BankAmericard was later renamed VISA.
Bank of America's competitors wanted a piece of the credit card pie as well. They formed MasterCharge in the 1960s, which later became MasterCard. VISA, MasterCard, and American Express continue to be the dominant players in the credit card industry.
A look back at the development of credit cards reminds us of the original intention of the product. When the two Franks established the Diners Club, they wanted to help consumers buy things now that they could afford, while paying for it later. Unfortunately, today's consumers often use their cards to buy things that they can't afford either now or later. Stick with the Diners Club vision, and only buy that hamburger today if you'll have the cash to pay for it on Tuesday.
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