A Brief History Of Credit Cards

Credit cards have nowadays insinuated themselves into all corners of our lives. It is rare for an adult these days to not carry at least one card. As well as being used in the traditional manner to buy goods or services in person, they are also now used online, over the telephone, and even for withdrawing money from cash machines. People use them in all sorts of ways. They can be a means of borrowing, as a convenient payment method, and even for earning money through rewards.

Despite their ubiquity in modern life, credit cards have a fairly short history. With the first general purpose credit card being introduced less than fifty years ago. In this article we’ll look at the brief history of credit cards, and then at how they’ve developed over the years.

The First Card

The very first credit card was launched by Diners Club in 1951. It was limited to use in twenty seven New York restaurants. Diner’s Club wasn’t a huge success initially, with only 200 cards being issued.

Introduction of Visa and MasterCard

The real story of credit cards began in 1958 with the introduction of two major new products. The first was the American Express charge card. It boasted over a million users within five years of it being launched.

The other innovation was the first example of what we now recognize as a credit card: the Bank Americard. This was a general purpose card developed by Joseph Williams while working at the Bank of America. Over time, this card was to develop into the Visa company that we know today. Eight years after the introduction of this card, fourteen U.S. banks formed an alliance to launch a rival to the Bank Americard, named Interlink. This company was to evolve into the Mastercard payment processor by 1979.

Worldwide Use

It was during the 1980s that the credit card industry began consolidating behind the two big processors, Visa and Mastercard. Banks dropped their own processing facilities, and began to issue cards that could be used at any outlet that supported these two main payment processors. It was this move that led to the great expansion in card use, as they could now be easily used almost anywhere in the world.

Online Only Cards

The next major change to the industry was the revolutionizing technology of the internet, allowing purely online cards such as Egg in the UK, to offer attractive benefits to the cardholder at low cost to the issuers. Competition between lenders quickly heated up, and features such as balance transfer offers began to appear.

Balance transfer deals allowed cardholders to move their debt from card to card and avoid paying any interest. Unfortunately, this couldn’t last as it was costing the credit industry billions every year. Balance transfer fees were imposed which made it much less attractive to cardholders.

Chip and PIN and Beyond

The last major change in the credit card industry has been the introduction of Chip and PIN technology which has cut card fraud substantially. This requires payments to be approved via entering a code number rather than relying on a signature. It also utilizes a small microchip embedded in to every card. The technology began to be rolled out in the UK in 2004. This has yet to be fully adopted for US card users. Using both your credit card chip and PIN for purchases is not something seen often in the US.

What’s next for credit cards? Only the issuers know! With record levels of debt many people are reluctant to apply for new cards. We’re likely to see more attractive features becoming available to new applicants as credit companies compete for the shrinking amount of business available.