How the First Credit Card Came to Be

In America, credit card history isn’t something most people think about. This is because credit, and thus credit cards, seem to be a timeless method of payment. However, the use of plastic payments is, for the most part, a twentieth century luxury. At the dawn of the 20th century, there wasn’t much of a system or practice to credit, at all. Today, most rely on the convenience of plastic for a numerous goods and services. How did credit become so prevalent, and who invented the first credit card?

Early Systems of Credit

During the 1920’s, the use of credit was regularly practiced in both the hotel, as well as the oil industries who commonly extended credit to their fondest customers. This practice then allowed patrons to pay for purchases or services later. Credit was first offered only from merchant to customer, who had to repay their debts directly with the original merchant.

Replicating the successes of hotel and oil companies, stores began offering lines of credit to attract new customers and boost customer loyalty. As a new concept of credit began to become more popular, merchants formed groups based on agreements to accept credit purchases from consumers with cards, all involving stores within their associations. This joining of forces gave consumers the luxury of shopping at a wide range of stores, while keeping the same agreement they had with the original merchant.

Early Charge Cards

John Briggins later created the charge card when he introduced the “Charge-It” program in the mid-1940s, which permitted merchants to directly deposit sales slips at their bank and, in turn, the bank would then bill that merchant’s credit customers. A few years later, the Diner’s Club card made it’s debut, allowing customers to dine at their choice of 27 restaurants in New York, and settle their bill later. Though the “Charge It” method, and the Diner’s Club agreements share roles in the foundations of the modern system of credit, neither are considered true credit programs. At that time, customers had to pay the entire amount due at each billing. Of course, this is in contrast to installment payments currently accepted by most credit card companies today. Such affords customers the opportunity to carry balances over several months. Each of these early programs, though, has its place in the invention of true credit cards, as these programs are the conceptual foundations upon which today’s credit system was eventually created.

American Express and Bank of America Take Credit to New Heights

In 1958, American Express offered their premier charge card with Bank of America debuting the Bankamericard later that year. Soon after this, the Bankamericard was rebranded the VISA card, and was the first credit card to be universally acceptable by merchants across the USA, the world, and universally used by consumers.

Credit Cards Then and Now

Recalling the invention of the credit card unveils a perfect illustration of how rapidly strong business ideas will spread and transform how business is done worldwide. In a short amount of time, the credit card became an incredibly popular and convenient tool that’s frequently used in the marketplace. Knowing their purpose, and how they came to exist, gives better perspective on their use and function today.