The credit card is an important part of our daily lives; however, it’s a rather modern innovation. How much do you know about the plastic in your pocket?
Most of us carry around a credit or debit card in our pocket. Imagine if we didn’t – we’d need cash for all of our purchases except the larger ones, which would rely on slower transfers between banks or merchant credit schemes.
To learn the story of this useful piece of plastic we’ve got to wind our clocks back to the 1920s, where the above was a reality.
The modern credit card is actually a successor to the aforementioned ‘merchant credit’ schemes. These schemes allowed customers to pay a merchant later on after they made their purchases. Initially, these deals were between individual merchants and consumers.
1920s - In the 1920s, such deals were common between petrol sellers and automobile owners – automobile owners would pay for any petrol purchased at the end of the month.
1930s - In the late 1930s, different petrol sellers began to accept each other’s cards in a bid to make more sales.
The Charga-Plate is probably the most easily recognisable ancestor of the modern credit card. It was a rectangular metal sheet that bore the customer’s identity details and an imprint of their signature. This card was used in the 1930s to the late 1950s and was used much in the same ways as department store cards are used today.
Another crucial step on the road to credit cards was the development of the Charge-It program. This was developed by John Biggins of the Flatbush National Bank of Brooklyn, and was an agreement between banks and merchants. When you paid for an item the bill was sent to the bank for review, and the bank would pay rather than the consumer.
Introduction of charge cards
1949 - In 1949, Frank McNamara, a patron at the famous New York City dining spot Majors Cabin Grill, forgets his wallet. His wife is able to pay for the meal, but not long after McNamara, along with his lawyer Ralph Schneider, decide that there should be something to save this kind of embarrassment.
Approximately a year later McNamara rolls out the Diners Club card to many of his friends and acquaintances, and by the end of the year the card is held by 20,000 people. They introduced the concept of a single card that would be accepted by multiple merchants. Soon afterwards Carte Blanche and American Express introduced their own cards.
Technically, these cards were not credit cards since they needed to be paid off in full at the end of each month. These were known as charge cards.
The first credit cards
The first credit cards were introduced in the late 1950s. Before then, nobody had been able to organise multiple banks to jointly issue a single card that could be used at a number of merchants.
1958 - In 1958, Bank of America launched the BankAmericard, now known as the Visa card. This was the first card in credit card history which gave consumers a revolving line of credit that could be used at a number of different retailers.
The card was introduced as a test in Fresno, California. 60,000 unsolicited cards were sent to residents and these were used around the city.
The test went well but ran into unexpected problems, including credit card fraud (which was a brand new crime), and also backlash from the media and politicians.
By the end of the test the Bank of America had lost millions of dollars but knew they had a good idea. After polishing the product, other banks both in America and overseas started to license the system, and combined with unsolicited mail drops of credit cards more and more started using them.
1966 - In 1966, 17 bankers joined together to launch their own card, now known as MasterCard.
Also in 1966 the first UK credit card was launched by Barclays Bank, known as the ‘Barclaycard’.
Latest developments in credit card history
Technology has taken centre stage in the latest credit card developments. Let’s have a look at the newest developments in credit card history.
Credit card chip technology. Security chips were introduced first on the Carte Bleue debit card in France, 1992. Now they are standard on almost all credit and debit cards in Australia. In countries like America, only about 1 percent of cards have chips in them.
The smart chip embedded in a credit or debit card is simply harder to crack than a regular magnetic stripe used to hold information.
- Contactless payments – Today most cards are also offered with payWave or PayPass functionality, allowing you to pay for a purchase of under $100 by tapping the card on the applicable terminal and. This technology was introduced first in 1997 by Mobil, through their ‘Speedpass’ system.In 2002, MasterCard’s PayPass was introduced in the USA, and by 2006 in Great Britain and Turkey.Later in 2007, Visa’s answer to PayPass – payWave – was introduced around the globe.
- Mobile payments – Mobile payments trace back to 1997 in Finland, when two Coca Cola vending machines were introduced which allowed consumers to pay for their purchases by sending a text. Then ringtones, and services such as paying for parking or airline tickets were progressively able to be paid with mobile phones.Today newer model smartphones with contactless Near Field Communication (NFC) technology can be used to pay for items. Google Wallet is one such application, which allows you to register your credit cards or debit cards onto your account, and then use them to pay for goods at stores, send payments to friends and more.
How many people use credit cards in Australia?
Credit cards in Australia have exploded in growth. Statistics from the Reserve Bank of Australia show that the number of credit card accounts has risen from 6.548 million in May 1994 to 15.410 million in July 2013.
Since January 1985, the value of purchases made on our cards has also risen from $450 million to July $22.974 billion.
This, combined with the fact that credit card technology is forever evolving, demonstrates this relatively young tool is here to stay.Back to top