Today, the credit card is commonplace. It allows you to quickly pay for almost any purchase and not have to carry your wallet everywhere, counting coins or bills. Before plastic cards, people successfully used only cash. So what was the reason for their invention and who owns the idea?
The predecessors of plastic card
Plastic cards have a few predecessors. For example, at the beginning of the 20th century, large department stores gave out metal tokens to their customers. There were special registers which were stamped with a badge against the buyer’s name. So it was possible to keep track of purchases.
The purchaser had to return the money within an agreed period. Such services were used only by local, well-to-do people. If a person received a token (later a card), it showed his high social standing.
Why did such an idea arise in the first place? After all, for the seller it would be more reliable to receive payment in cash here and now. The secret is to get more value. If the customer doesn’t have the money, he will leave the store with nothing. He will spend the money elsewhere later, and losing the customer is a blow to the seller. It’s a kind of struggle for profit and loyal customers.
The disadvantage of local tokens or cards is the inability to use them away from the receiving city or at another outlet. American Express found a way out of the situation – it invented the traveler’s checks. The owner of the cheque could pay with it anywhere. With loss or theft, it was enough to apply to the office of the company.
Besides stores, customer cards were used at gas stations. But in that industry, the paper was quickly going bad – so came the embossed steel plates produced by Farrington Manufacturing. The person accepting payment with the card made an imprint of the data embossed on it.
The real revolution to buy and selling occurred in the United States during the 40s and 50s. This time is commonly referred to as the “merchant boom.” A new system of payment appeared, according to which customers, instead of cash, left receipts in the stores. These documents were transferred to the bank, where the seller was paid for his goods.
Diners Club
In 1950, the Diners Club company was born. It is still successfully operating under the name Diners Club International. The origin of this company has an interesting background.
The future founder of Diners Club, Frank McNamara, was having lunch one day in a restaurant, and found that he forgot his wallet with money. The situation turned out to be unpleasant – there was nothing to pay for lunch. Frank had the idea of starting a club where customers could go to places of entertainment without having to worry about cash.
The essence of Diners Club is the following. A client signs a contract with the club, according to which Diners Club becomes his creditor. After that, it is possible to use different services of the club’s partners – all the bills go to the guarantor.
Diners Club sends regular statements of expenses to the client, and the latter undertakes to repay all the expenses once a month. The first 200 cards were issued in 1950, and by the end of the year there were at least 20 thousand of them.
The first bank cards
For a long time Diners Club worked without competitors. But in 1958, a financial institution Bank of America has issued its credit cards with a limit of 500 dollars – BankAmericard. Credit cards were issued by other banks before. For example, in 1951 there was the first bank card, Long Island Bank. However, it was BankAmericard that spread quickly and en masse.
Interesting fact: Bank of America offered cooperation to other banks after the success of credit cards. But none of the institutions were eager to put a competitor’s name on their cards. That’s how the single mark VISA appeared – a payment system that still leads the market in terms of the number of transactions.
The history of credit cards began with their simplified predecessors. At the beginning of the 20th century, they were metal tokens, which were issued only to loyal customers of certain stores. Later there were cardboard cards, on which you could make notes. Then there were embossed cards, and so on, up to more modern plastic cards with magnetic strips and chips. The first universal credit card is considered a card issued in 1950 by Diners Club. One founder of the company once couldn’t pay for lunch in a restaurant. So he had the idea of creating credit cards.