How Did Credit Cards Begin?
There’s no escaping credit card these days. Many people use them on a daily basis, but have no idea how and where they originated. Time for a quick history lesson! It’s an interesting story, we promise.
Credit has been with us since the dawn of trade. In the olden days, shops would keep open accounts, or tabs, for their customers. The customers would take the goods they needed, the shopkeeper would mark their purchases in a ledger, and the tab would be paid some time later.
Credit in card form was first documented in literature in the 1887 novel Looking Backward by Edward Bellamy. Bellamy predicted that one day customers would be able to make purchases with a small card which represented their available credit. His prophecy came true in 1914 when Western Union issued purchase cards to its best customers.
Gas cards were an early type of credit card. As more and more people bought cars in the 1920s, those cars needed fuel, so gas stations started to issue cards which could be used to make fuel purchases.
Next were store credit card which were originally designed as a marketing ploy. Store cards helped increase many retailers’ customer bases. Shoppers liked the fact that they could buy now and pay later, and retailers liked the fact that the customer had a specific amount of time in which to pay off their debt. Prompt payers gained a good reputation among merchants – an early form of credit history.
The 1930s and 40s saw the advent of revolving credit. Shops started off by allowing customers to pay off their debt over several months, making sure that the debt was paid in full before further purchases could be made. Then they abolished the repayment limits. This meant that shoppers could carry a balance on their credit card that didn’t have to be repaid in a designated time period. Instead, the customer had to repay a certain amount of debt every month – the minimum monthly payment. This meant even more convenience for customers, but wasn’t necessarily good news, as many weren’t aware that they risked getting into serious debt. Early credit card companies made money from fees and interest, as they do today.
In the 1950s, an all-purpose credit card was invented by Ralph Schneider, which could be used in place of multiple charge cards. This was when visa, American Express, Diner’s Club, and others came into being. Popularity increased throughout the 70s and 80s.
So there you have it – a quick history of those ubiquitous little bits of plastic that so many of us take for granted.