Ever wondered about the origin of credit cards? Take a trip down memory lane and discover the fascinating history of plastic.
Credit cards have become so familiar that few of us question how they work, much less where they came from. But they have come a very long way since the first cards were invented in America in the 1950s. Here, we’ll look at the origins of credit cards, the parties credited with inventing them and when the first credit cards were made in Australia.
The story of the first credit card
It is fabled that credit has its origins in the late 19th century, where charge coins were given to regular customers by petrol companies, department stores and hotels. In the early 20th century, charge coins evolved into charge cards.
The 1930s also saw the use of Charga-plates: metal plates imprinted with the customer’s name and account details (sometimes with a signature behind) that looked like military dog tags. These were convenient for reducing bookkeeping errors and speeding up sales administration, but were still a far cry from providing the functionality of a credit card.
Building on these payment options was the “Charg-it” card, developed by John Biggins of the Flatbush National Bank of Brooklyn in 1946. This was the first bank-issued card, and allowed the bank to settle payments with the merchant on behalf of its customers within the state.
Soon after that, in 1950, Frank McNamara and Ralph Schneider presented the first Diners Club card, a card made of cardboard designed for dining, entertainment and travel purposes. Story has it that Frank McNamara discovered his impetus for the card after forgetting his wallet and being embarrassed at dinner when the bill came.
The rise of credit cards in America
As the success of Diners Club grew, other companies raced to create a card that would be widely accepted. American Express introduced its travel and entertainment card in 1958, and Bank of America launching the BankAmericard (now Visa) in Fresno California that same year. At this time, Diners Club and American Express charged customers an annual fee and merchants a percentage fee of their total transactions, while the bank credit card system allowed customers to pay in monthly instalments with interest (or “carrying charges”).
While Bank of America was a forerunner in the process, licensing their Californian card system to banks in other states and then forming a bank card association across America to facilitate interstate use of the card, MasterCharge (now MasterCard) soon came on the scene in direct competition in 1966.
The rest is history, with computerisation propelling the use of credit cards over the next few decades by speeding up the cashless payment process, and with card associations strengthening their international reach by implementing global processing systems and the necessary accompanying procedures. Visa became a company in its own right and was renamed in 1976, and MasterCard in 1979.
When was the first Australian credit card made?
In Australia things were slightly different, with only restrictive store-issued cards and some Diners Club and American Express credit cards accessible to the elite before 1974. Because of our small population and large geography, Australian banks needed to cooperate to develop their own card network. They also needed the Reserve Bank of Australia’s approval, as well as the viable technology to execute a nation-wide shared facility.
As such, the Bankcard was launched in 1974 when electronic data processing and communications had evolved sufficiently to support the day-to-day processing of credit card transactions. Each bank issued its own Bankcard and independently administered their own card rules and customer services.
The rise of credit cards in Australia
By 1976, there were more than 1 million Bankcard holders and almost 50,000 participating merchants. By 1984, more than 5 million Bankcards had been issued across Australia and even in New Zealand.
The only flaw in the scheme was that it never gained international usability, which signalled its decline after globally-accepted Visa and MasterCard were launched here in 1984. By 1994, Bankcards had been reduced in circulation to 3.9 million and were subsequently withdrawn in 2007 after dwindling subscription and transaction volumes, and after having lost much market share to Visa and MasterCard.
However, credit cards have continued to grow in popularity and acceptance in Australia, nearly as quickly as technology has allowed. Other milestones include the first ATM in 1977, the launch of the EFTPOS system in 1983, the invention of telephone and Internet banking in the 1990s, BPAY in 1997, and chip cards, contactless payments and mobile banking in the 2000s.
These days, we don’t even pay a second thought when pulling out that plastic card to swipe or tap it. Cash has been slowly phased out of our everyday lives, and it seems like cards will follow suit. We’re moving quickly from contactless payments to cardless payments, and very soon all you’ll need is your mobile phone. Then it might be time to retire that contraption we call the wallet.Back to top