Charge it! A brief history of credit cards and other media
Credit cards are something that we in the western world take for granted today, and few realize that they have a history stretching back 150 years. Indeed, their origins lie with when we first became numbers. As retail stores grew with multiple employees, staff could not know everybody personally—especially when goods were charged to accounts.
Department stores responded by issuing customers small identifying tags—stamped with account, membership, or other numbers/identifiers—to prove identity and ensure debiting of purchases/services to the correct accounts (some would have a request on one side asking for its return to the outlet if lost). The intention in most instances, was that the full account would be settled at month end, but there were definitely instances where the accounts were revolving, and likely others where payments were negotiated or scheduled.
The first medium was ‘charge coins’ issued from about 1865. Each allowed purchases from one outlet only, often with an account number stamped on it. The first were celluloid, but copper, aluminium, and white metal became the norm. Over time, they were also used for hotels (La Salle), vehicle service (Firestone), hardware (L.F. Wolf), and women’s shoes (Geuting’s), and were still in use in the 1940s.
From the early 1900s, other formats were adopted. In 1914, Western Union issued paper business-card like cards that allowed preferred customers to send telegraphs from any office, the first multi-branch application. They were followed by General Petroleum in 1924 for fuel and repairs, who borrowed upon the department store practices in the 1920s using small embossed metal plates—of which imprints could be made. These were called charga-plates (or alternatively charge, shopper’s or shopping plates).
In 1946, John Biggins of the Flatbush National Bank of Brooklyn became the first to offer a bank-issued card called Charg-It, but it was only valid at merchants within a two block radius of his bank.
Diners Club was the first that could be used both at different branches and companies across a broad geography. Its inspiration came in 1949 when Mr. Frank McNamara forgot his wallet in another suit and his wife settled the bill—when entertaining clients at Major’s Cabin Grill in New York. For Frank this was a total embarrassment, but sparked an idea and partnership with Ralph Schneider, Matty Simmonds, and Alfred Bloomingdale.
That next February, he returned to the offending restaurant with Ralph Schneider for the “First Supper”, paid for using the stiff paper card. The initial offering was only for use at 27 nearby restaurants, but both the merchant and subscriber base grew rapidly thereafter, with subscribers going from 200 to 43,000 within a year. By 1953 the card was being accepted in the UK, Canada, Cuba, and Mexico.
They were followed by American Express in 1958, who were the first to issue embossed plastic cards in 1959. Today, Diners Club and Amercan Express are still the two best known ‘travel & entertainment’ cards.
The real boom was from 1959 with Bank of America’s Bank Americard, which went beyond travel and entertainment, It was licensed to other banks from 1966, and became Visa in 1977.
They were quickly followed by various oil companies bold enough to send unsolicited cards in the mail—and suffer pain of non-payment (the practice was later outlawed).
In 1966, Barclays Bank became the first in England with its Barclay Card, and in ’67 four California banks came together to offer the Master Charge card, which became MasterCard from ‘79.
Over time, the combination of charge, credit, and debit cards overtook cheques as a payment medium, and they are in turn being supplanted by internet banking and mobile payment options—at least for the payment functionality.
In many developing countries, charge cards have never really gained wide acceptability outside of those areas dealing with tourists. They have often struggled to gain acceptance amongst the general populace, because there are often limited outlets where they can be used for day-to-day purchases, and the fees can be expensive. As a result, it is well possible that they never gain proper traction within those environments.
Driving change with a passion for innovation, process optimization, and thinking outside the box.
3yRaymond Anderson I'm writing book about the payment industri and it's history. Is it okay I use your pictures of the charge-plates in my book?
Author of “Errol’s Commodity Wire”
7yInteresting article Raymond. Hello from snowy Calgary to Johannesburg!
Programme Director at Yoco
7yThanks Ray! Lots happened prior to the mag stripe!
Economista / MBA en Banca y Finanzas
7yVery interesting article, thanks for sharing!