Charge Coins to Digital Wallets: A short history of credit cards
history of credit cards, borrowing, and lending

A short history of credit cards

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The evolution of borrowing and lending, from the 1800s to today.

We swipe our credit cards every day. But have you ever wondered how these cards came to be?

The concept of credit stretches back to ancient times. Back then, people used instruments like the tally stick to record debt. With this method, each party of a transaction would make notches in the stick to signify debt owed. Then the stick would be broken in half so each party could keep a record.

Fast-forward to the late 1800s, when charge coins came into fashion. Made of aluminum or steel, these coins were typically issued by department stores. During a purchase, the coin was used to imprint a customer’s information onto a sales slip.

These coins — and charge plates of the early 1900s — were precursors to the modern credit card. In short order, retailers began adopting the rectangular cards we know today.

How early charge cards were used

In the early 1920s, oil companies, airlines and department stores began giving out “courtesy cards.” Customers could use these cards only with the issuing companies.

In 1946, banker John Biggins created the first bank-issued card, calling it the Charg-It. The idea behind this card was simple: A customer used the card to buy something from a local merchant. The local merchant sent the transaction to Biggins’ bank, which paid the merchant and collected money from the customer. There was one small problem, however: The Charg-It could be used for local transactions only.

A solution arrived in 1950, when the Diners Club introduced the first universal card. Instead of being tied down to one establishment, Diners Club members could use the card for many purposes — especially travel and entertainment. Initially, members could use their cards at 27 restaurants in the New York City.

The Diners Club Card was a charge card — cardholders had to pay their bill in full each month. It came with a $5 annual fee, which is about $49 in today’s dollars. Diners Club also charged merchants 7% to 10% for every card transaction.

Not to be outdone, the American Express Company introduced its Green Card in 1958. Like the Diners Club Card, it was a travel-and-entertainment card that could be used widely. Though American Express was second to market with charge cards, it was first to introduce plastic cards. (Diners Club switched to plastic in 1961.)

The BankAmericard and revolving credit

But 1958 wasn’t just the year of the Green Card: It was also the year of the BankAmericard.

The BankAmericard was different because it was a general use card. Customers could use it anywhere as long as merchants accepted it. It was also the first card with revolving credit. With revolving credit, consumers didn’t need to pay their balances in full each month but could instead pay off their cards over time.

BankAmericard was initially released in California. It was such a success there that Bank of America started licensing it to banks nationwide in 1966. Soon, international banks started issuing the card — you could find it in Canada, Ireland, Japan and Great Britain.

Seeing the success of the BankAmericard, manufacturers Chemical Bank and Hanover Trust Co. created the Eastern States Bankcard Association. In collaboration with other regional bank groups, they started issuing cards through a network they called the Master Charge Plan.

At the turn of the decade, the BankAmericard’s issuing banks created National BankAmericard Incorporated. In 1976, BankAmericard was renamed Visa. Master Charge followed suit three years later, becoming Mastercard in 1979. And in 1985, Sears, Roebuck and Co. jumped into the credit card market with its Discover card.

Credit cards and the 2008 financial crisis

Revolving credit was an incredible innovation, but it provided consumers with more opportunities to accumulate debt.

This wasn’t a huge problem, as consumers were highly judicious about what they bought on credit. As recently as the 1980s, most Americans didn’t buy nonessential items on credit. But that’s changed over time. Now, according to a recent CreditCards.com survey, roughly 17% of credit card owners use their card on purchases of $5 or less, an uptick of 5% from the year prior and a sign of increasingly casual credit usage. It’s also normal to buy luxuries on credit, and today’s households that carry debt have an average of $16,000 in credit card balances.

In 2008, Americans held $951 billion in credit card debt. When the global financial crisis hit that year, many Americans found themselves charging more on credit cards for essentials like food and housing. With more debt, it became more difficult for consumers to make payments — and many of them defaulted.

Many card providers took advantage of these defaults with abusive business practices. They’d hike interest rates without notifying consumers, levy egregious overlimit fees and add confusing rules to card terms. Many consumers spiraled further into debt as a result.

Credit CARD Act of 2009

In response to shadowy card-provider practices, the US Congress introduced the Credit Card Accountability Responsibility and Disclosure (CARD) Act in 2009. The bill created many important protections for consumers that included:

  • Notifications for rate increases. Card providers must let you know 45 days in advance if they’re increasing your interest rates.
  • An end to retroactive rate increases. Prior to the Credit CARD Act, card issuers could retroactively raise interest rates after customers defaulted.
  • A legal ban on double-cycle billing. This now illegal practice allowed providers to charge interest on your current and previous month’s balance. It was widely considered unfair, because consumers were charged even when they’d already paid off purchases.

With its many consumer protections, the Credit CARD Act passed Congress with bipartisan support. It was signed into law by President Barack Obama on May 22, 2009.

The future of credit cards

EMV (“Chip”) Technology

Credit cards have come a long way, and they’ll inevitably evolve as financial payments change.

We’re used to the magnetic stripes on our cards, but this technology is highly susceptible to fraud. In recent years, Americans have been introduced to EMV or “chip” cards — technology that the rest of the world has been using for a long time.

EMV cards are difficult to clone and use more advanced encryption, offering a higher level of protection to consumers. Very soon, we’ll do away with swiping our credit cards altogether. Instead, we’ll “dip” our cards instead, inserting them into chip readers.

Beyond Plastic

This all might be moot, however, in light of big technological advancements in the payments industry. As time goes by, we may not need credit cards at all and instead use our digital wallets.

Many payment-industry experts believe that mobile devices and wearables are on their way to replacing credit cards. In a decade or two, we may use our smartphones for all of our payments. And by midcentury, we may be paying for items with microchips on (or in) our wrists.

A future without credit cards isn’t so far-fetched. We can already make mobile payments through services like Apple Pay and Android Pay. These platforms can be more secure than credit cards, because they don’t transmit card numbers when consumers make purchases. In time, they may become a universal standard — just like credit cards are today.

Compare credit cards

Name Product APR for Purchases (Purchase Rate) Intro APR for Balance Transfer Annual Fee
14.74%, 18.74% or 24.74% variable
0% for the first 15 months (then 14.74%, 18.74% or 24.74% variable)
$0
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees
12.74%, 16.74% or 20.74% variable
0% for the first 18 months from account opening (then 12.74%, 16.74% or 20.74% variable)
$0
An 18-month 0% Intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
16.74% variable
0% for the first 15 billing cycles (then 16.74% variable)
$495
Mastercard Black Card members receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
16.74% variable
0% for the first 15 billing cycles (then 16.74% variable)
$195
Enjoy unique excursions, privileged access to exclusive events and insider opportunities.
16.74% variable
0% for the first 15 billing cycles (then 16.74% variable)
$995
Earn points every time you spend. Luxury Card enhances your purchasing power by providing you with one (1) point for every one dollar ($1) you spend. Every purchase gets you closer to the rewards you want.
24.74% variable
$39
Designed to help build credit history with no deposit required and access to benefits.
23.9% variable
$75 annual fee for the first year ($99 thereafter)
With this card you get a 23.9% Variable APR.
19.74% to 25.74% variable
$0 to $99
Get 1% cash back rewards on eligible purchases including gas, groceries, and services such as mobile phone, internet, cable and satellite TV, terms apply.
14.74% to 25.74% variable
0% for the first 15 months (then 14.74% to 25.74% variable)
$0
Earn 10,000 Membership Rewards® Points after you use your new Card to make $1,000 in purchases in your first 3 months.
14.99% to 24.99% variable
0% for the first 12 statement closing dates (then 14.99% to 24.99% variable)
$0
Earn more cash back for the things you buy most.
14.74% to 25.74% variable
0% for the first 15 months (then 14.74% to 25.74% variable)
$0
Earn $200 back after you spend $1,000 in purchases on your new Card in your first 3 months. You will receive the $200 back in the form of a statement credit.
17.74% to 24.74% variable
$0 annual fee for the first year ($95 thereafter)
Earn 50,000 points when you spend $4,000 on purchases within the first 3 months of your account opening, and an additional 30,000 points when you spend a total of $30,000 on purchases within the first year of your account opening.
17.74% to 24.74% variable
$450
Earn 50,000 BONUS POINTS after spending $4,000 on purchases in the first 3 months from account opening* — that's $750 toward travel when you redeem through Chase Ultimate Rewards®.
14.74% to 24.74% variable
0% for the first 12 months (then 14.74% to 24.74% variable)
$95
15,000 Membership Rewards points after you spend $1,000 in the first 3 months of opening your account
16.74% to 25.49% variable
0% for the first 15 months (then 16.74% to 25.49% variable)
$0
Earn unlimited 1.5% cash back on every purchase - it's automatic. No minimum to redeem for cash back.
17.74% to 24.74% variable
$95
Earn unlimited 2 points for every $1 spent on travel and dining purchases and 1.5 points for every $1 spent on all other purchases.
14.74%, 20.74% or 24.74% variable
0% for the first 15 months (then 14.74%, 20.74% or 24.74% variable)
$0
Earn unlimited 1.5% cash back on every purchase, every day
16.74% to 25.49% variable
0% for the first 15 months (then 16.74% to 25.49% variable)
$0
Earn 5% Cash back in bonus categories up to $1,500 every quarter. Earn 1% Cash back on all other purchases.
16.74% to 24.74% variable
$0
20,000 online bonus points offer. Ditch the restrictions of typical airline rewards cards. Any airline, any hotel, anytime. No blackout dates.
16.74% to 25.49% variable
0% for the first 15 months (then 16.74% to 25.49% variable)
$0
Jumpstart your financial fitness! 60 day introductory balance transfer offer, save on interest, and get your free monthly credit score.
14.74%, 21.24% or 24.74% variable
$0 annual fee for the first year ($95 thereafter)
Earn 50,000 bonus miles after spending $3,000 on purchases within the first 3 months from account opening.

Compare up to 4 providers

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US Credit Card Offers

Important Information*
Deserve® Classic Card
Deserve® Classic Card

APR

24.49
variable

Annual fee

0 For the first year
More info
Luxury Card Mastercard® Gold Card™
Luxury Card Mastercard® Gold Card™

APR

16.74
variable

Annual fee

995 For the first year
More info
First Access Visa Card®
First Access Visa Card®

APR

29.99
variable

Annual fee

75 For the first year
More info
Indigo® Platinum Mastercard® Credit Card
Indigo® Platinum Mastercard® Credit Card

APR

23.9
variable

Annual fee

75 For the first year
More info
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