Credit Card History
When I started with Platinum Payments, I never even knew the credit card processing world existed, let alone how it keeps running smoothly. Since I never knew, there are probably, hopefully, others that have no idea either. I like to nerd out sometimes, and this happens to be one of those topics. The history of credit cards might sound rather lame, ok, really lame, but I promise, there are some cool things here!
Can you imagine what life would be like 500 + years ago? What would those whose crops weren’t quite ready for a trade yet, but they desperately need milk from their neighbor who has the cows?
In the early 20th century, department stores, airlines, and gas stations offered what was referred to as a “shopper plate or charge coin,” but the first official credit card appeared in 1950 with a “charge” sign at participating merchants.
The 1940s
In 1946, John Biggins of Biggins Bank held the spot for the first actual credit card. Consumers could use the Charge-It card within the group of businesses that were associated with Biggins Bank. The merchant would send the invoice to the bank and would receive payment on behalf of the customer.
The Diners Club Card emerged in 1949, and rumor has it that it was created by Frank McNamara and a partner when they found themselves embarrassed for not having enough money to cover their restaurant tab. The Diners Club is the first credit card processing industry acquirer because it was the first to charge merchants a discount rate.
The 1950s + 1960s
American Express joined the credit card industry in 1958 with a plastic card geared towards travel and entertainment, or ‘T&E.’ The objective was for business people who are on the road could pay for their travel and entertainment without the need for a bunch of cash on hand.
However, the first plastic credit cards introduced left room for human error since the merchant would take an imprint and send it to the billing department, which added on an even longer time frame. Finally, in the 1960s, IBM entered the scene by adding the coding information with the magnetic stripe.
In 1960, Bank of America launched its version of a bank card association that licensed other banks to issue their BankAmericards while processing BankAmericard transactions. This was also when the idea of revolving credit became more prevalent. Consumers liked the idea of the ability to roll over part of the due amount in exchange for a small fee.
By 1966 the Interbank Card Association was created by MasterCharge, who eventually became MasterCard. The foremost benefit was that associated banks could exchange information on credit card transactions across their network. The association had member committees to establish the rules and regulations, such as authorization, security, marketing, settlements, and other legal aspects. Third-party companies emerged to sell processing services, which reduced banks’ role in dealing with settling accounts and paying the merchants. Eventually, Visa and MasterCard took over to develop arbitration and the standard procedures to facilitate international payments and reduce fraud.
The 1970s + 1980s
In 1970 Bank of America watched MasterCard dominate the industry, forming their association, National BankAmericard Inc of NBI. Worthern Bank and Trust Co sued the NBI, and they argued that NBIs restrictions with competing cards put them at a ‘competitive disadvantage.’ Even though Worthern lost the case, the NBI changed its rules anyway at the suggestion of the U.S. Department of Justices’. As a result, banks were allowed to offer both credit cards from that point forward, permanently changing the processing world.
In 1976, National BankAmericard restructured as Visa USA, MasterCharge followed suit and became MasterCard in 1977. Discover was the late bloomer of the crowd and didn’t show up until 1986. Fun fact, Discover was created by Sears and was introduced during a commercial for the Super Bowl. After that, discover bounced between a few companies before gaining independence as Discover Financial Services in 2007.
The 80s brought forward more electronic payments, with VeriFone releasing its first POS in 1981 and terminal in 1983. Automated Teller Machines or AMTs started popping up, giving people access to their cash and accounts 24/7. When dial-up terminals debuted, the whole process got much quicker. Authorizations and settlements were now done remotely, whereas before, it was done via phone. Crazy to think how things started with trading chickens to the ability of payment options from a smartwatch or NFC.
If you’re ready to upgrade your system, schedule with a payment professional and take advantage of the year-end sales and extra discounts!
Plus, did you know we offer ATMs as well?!
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