Where Credit Cards Come from - Briefing on the History

Do you actually know where credit cards come from? Or, better to say, who invented such convenient tool of payment? The whole idea of credit paying has been known to humankind for several thousand years. With the expansion of technology, credit form of payment has also expanded throughout the world. Nowadays, credit cards are used almost everywhere where payment is required.

Certainly, there were some differences. For instance, credit cards have never looked the way they are now. They even weren't called "credit cards". It is not so long ago that card issuers have started making them of plastic.

Let's start from the very beginning. This way we will understand how credit card history came to where it is now.

The very first form of credit appeared in Egypt and Babylon. It was 3000 years ago and was mainly used by merchants who accepted the payments for the goods they sold on the monthly basis. In 18th century such credit system was also offered by tailors - they kept track of their debtors on special wooden sticks.

It is believed that the first credit cards appeared in the US in 1929s, but there are facts that credit cards were also used already in 1890 in Europe. The first more or less similar to the modern plastic credit cards appeared in 1920s. It was connected with selling cars.

The first bank credit card was issued by a bank in New York in 1946.

As the possibilities of transportation expanded, merchants started to search for new ways to attract clients. In order to build client loyalty, they started offering charge accounts for their buyers. These accounts could be accessed via special charge card.

It was the year 1950 that Ralph Schneider together with Frank X. McNamara introduced a scheme that allowed clients to pay with their special card at different stores. Thus, they turned out to be the middlemen between those who sell and those who buy. They gave a name to their newly created company - Diners Club.

As a result of this new scheme, lots of cards were to be carried around. Diner Club's founders had the goal of simplifying the process of these charge cards' transactions. Cards were needed to be accepted in different stores.

There used to be no interest to be paid. Diners Club Company needed to have a source of profit. First Diner Club's cards didn't charge any interest. Merchants were obliges to pay 7% interest on each transaction and customers had an annual fee of $3. There were no credit card rewards at that time.

Certainly, merchants weren't very happy - paying for transactions wasn't the happiest thing. They also worried about competition to their charge cards. Moreover, clients didn't want to sign up unless there were many merchants that would all actually accept this card.

But credit cards kept expanding. By the end of 1950, 20'000 cards were issued. Soon after that new companies (such as American Express) started their activities on the market. Credit cards became a convenient and effective tool of payment - not just a source of money.

The basic concept hasn't changes since then. The only drastic difference is that we have got contemporary automates service that handles even credit card online applications! All the telecommunication technology advancements are widely used. What is more exciting that there is a lot to be explored and invented in the modern credit industry?