If you have a credit card, you’re part of the 70% of Americans who own at least one card. Here’s your opportunity to learn more about this method of spending.
• Before there were actual credit cards, in the early 1900s, major department stores such as Macy’s and Marshall Field offered credit to their best customers. This was in the form of paper or brass tokens which the customer would present to the clerk, leave with their purchases, and pay for by the end of the month. By 1929, credit sales amounted to 50% of total sales in stores that offered it.
• In late 1949, business Frank McNamara was entertaining clients at a New York City restaurant when he realized he didn’t have his wallet. After being bailed out by his wife, McNamara determined that he would never be caught without a means of payment again. A few short months later, he and his attorney had established the Diners Club Card, a cardboard card that could be used in New York restaurants. At first, it was accepted by 28 restaurants and two hotels, but was soon expanded to include numerous hotels, car rentals, and flower shops. By the end of the year, Diners Club had 20,000 members, each paying an annual membership of $5.00. The following year, there were 42,000 cardholders. It was a requirement that the balance be paid in full each month.
• In 1951, New York’s Franklin National Bank got in the game with a multipurpose card. When they realized that they couldn’t make money by merely charging fees to merchants for each card purchase, Franklin allowed customers to carry debt over with an interest charge.
• Bank of America launched its BankAmericard in 1958 by sending out mass mailings of cards to anyone who did business with them in California, about 2 million cards.
• In 1966, BankAmericard went national as the country’s first licensed general-purpose credit card. Ten years later, the card was renamed Visa.
• We might refer to paying with a credit card as “using plastic,” but they were all cardboard until 1959, when American Express issued the first plastic credit card.
• Master Charge was introduced in 1966 by a group of banks. More and more banks began issuing credit cards during the 1960s, using the mass mailing approach, sending cards to millions of prospective customers. Finally, in 1970, legislation was passed in the form of the Unsolicited Credit Card Act, which prohibited banks from sending active cards to anyone who hadn’t requested one.
• The Discover card was launched in 1985 by Sears, the largest retailer in the United States at the time. Discover offered an innovative concept – no annual fee, higher-than-normal credit, and a cash-back bonus, in which a percentage of total purchases was refunded to the cardholder.
• IBM engineer Forrest Parry revolutionized the function of credit cards when he invented the magnetic stripe card in 1960. In the mid-1990s, the three credit card giants, Visa, MasterCard, and Europay, jointly introduced the first chip-based credit card. Designed to improve payment security above the magnetic strip cards, small microchips were embedded in the card to gather and store data between merchants, customers, and banks. With each purchase, the chip generates an encrypted code unique to the transaction.
• In 1970, just 16% of American families held a bank credit card. By 1998, that figure had risen to more than 65%. There are more than 1 billion active credit cards in the U.S. Average balance on a credit card exceeds $5,800. During the final quarter of 2022, total credit card debt in America reached a record $930.6 billion.
