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The history of the credit card

The evolution of credit cards, from the 1800s to today.

It’s easy to take credit cards for granted. They’re a fast, secure and popular payment option, and, much like the toothbrush or the doorknob, does anyone really wonder how these everyday items came about? The history of credit cards is filled with fascinating details and facts, which we explore with a look back at their evolution.

The credit card timeline

Initially, we go back to the early 20th century, which is around about the same time synthetic plastics (which helped give credit cards their nickname) were invented.

Early forms of credit

  • 1900s. Charge coins were the earliest recorded credit forms. Large merchants such as hotels, department stores and petrol companies would issue their regular customers with charge coins to use with their store charge accounts. These coins took all shapes and forms and were made out of metal or celluloid. The cards bore the customer’s charge account number and merchant’s name and logo for easy imprinting on sales slips. Since there were no other identifying marks on the charge coins, they could be easily stolen and used for fraud.
  • 1930s. Charga-plates came next; these were a rectangular metal plate that closely resembled a military dog tag. The Charga-plate bore the customer’s name, address, account number and sometimes their signature, which helped prevent fraud. However, this form of credit was still only issued by large merchants and could only be used in the issuing store.

Charge cards and credit cards

  • 1940s. In 1946, banker John Biggins developed the Charg-it card, which marked the first banking attempt to issue a card that customers could use at more than one merchant store. Issued by the Flatbush National Bank of Brooklyn, New York, customers could use this card at a range of merchants within the state, and the bank would settle payments with merchants on their behalf.
  • 1950s. About four years after that, Frank McNamara and Ralph Schneider issued the first Diners Club card in 1950. These cards were made of cardboard and could be used in participating restaurants. Cardholders paid an annual fee of US$3 while restaurants paid 7% on transaction values. This was still a charge card and not a credit card per se, in the sense of offering revolving credit.
  • In 1958, American Express launched its travel and entertainment card in competition with the Diners Club card, while Bank of America launched its first BankAmericard (later renamed Visa in 1976) in Fresno, California. Whereas Diners Club and American Express issued charge cards, Bank of America issued credit cards that allowed its customers to pay for their purchases in monthly instalments with accruing interest (or “carrying charges”).
  • 1960s. Around 1965, Bank of America started licensing its Californian credit card system to banks across America. This move also led to the formation of a national bankcard association for enabling nationwide use of the BankAmericard (often seen as the beginnings of Visa). In 1966, MasterCharge (renamed MasterCard in 1979) jumped on the scene as a cooperative of Northeastern banks wishing to honour cards issued by one another. Visa and MasterCard have gone head-to-head ever since.

The global credit card market

  • 1970s. In 1978, the Bank of New Zealand started issuing Visa Debit cards with its current accounts. It became a credit card in 1980.
  • 1980s. In 1980, Bankcard signed a co-branding agreement with Visa and MasterCard to enable international usability. However, this was a false start, with that agreement quickly dissolving in the same year. In the 1980s, the EFTPOS system and Bankcard were successfully introduced in New Zealand. Simultaneously, both Visa and MasterCard were launched internationally.
  • 1990s. By 1994, Bankcards had shrunk in circulation to 3.9 million, a trend which would lead to its subsequent demise in 2007. However, credit cards kept growing in popularity, helped by the invention of the telephone and Internet banking in the mid-1990s.

The rise of rewards cards and complimentary extras

  • 2000s. The millennium marked the rise of the rewards credit card, where Airpoints and complimentary extras have come to prominence among credit card users. The demand for Airpoints credit cards has soared in New Zealand, with savvy travellers monetising their daily expenditure to finance more travel. Complimentary extras like free travel insurance, airport lounge access and airport chauffeuring services have also become popular amenities.

Fraud concerns

  • 2000s. Credit cards have both thrived and suffered alongside rapid technological advancements over the last two decades. Chip-and-PIN card technology, contactless payments, mobile banking and Internet shopping have borne higher incidences of credit card fraud and scams. Plus, phishing, skimming and hacking have all become significant threats that take the focus off old-school physical theft. However, credit card companies, banks and governments have diligently tried to address these issues with their own set of inventions. It’s led to the rise of policies, services, and tools, including zero liability protection, fraud monitoring services, government support services and federal investigations into criminal card activity.

The future of credit cards

EMV (“Chip”) Technology

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

First came magnetic stripes on our cards, but the technology was highly susceptible to fraud. Now we have EMV technology.

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

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 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 Google 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.

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