The History of Credit Cards

History of credit cards
The first credit card was issued in 1951
Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange - the forerunner of banknotes - was established in the 14th century. Debts were settled by one-third cash and two-thirds bill of exchange. Paper money followed only in the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called "tallymen" because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shopper's plate - a "buy now, pay later" system - was introduced in the USA. It could only be used in the shops which issued it.

The earliest form of the bankcard was "Charg-It", a system of credit developed by John Biggins in 1946 which allowed customers to charge their local retail purchases. In 1950, Diners Club and American Express launched their charge cards in the USA, the first "plastic money". The merchant then deposited the charges at Biggins' bank, and the bank reimbursed the merchant for the sale and collected payment from the customer. This system helped introduce the first bank credit card, which was circulated by Franklin National Bank in Long Island, New York in 1951. In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. Once an application was submitted for credit worthiness a card was issued. Merchants copied information from the card onto a sales slip and called for an approval for each transaction over a specified limit. The bank would then credit the merchants account for the sale minus a discount to cover the cost for providing the loan.

By 1959, many financial institutions had begun credit programs. Simultaneously card issuers were offering the added services of revolving credit. This gave the cardholder the choice to either pay off their balance or maintain a balance and pay a finance charge.
In 1960, Bank of America, introduced its own bankcard, called BankAmericard, and began licensing regional financial institutions to act as the BankAmericard bank for their region. BankAmericard is now what we know currently as Visa.
Other banks began looking for other ways to compete, in 1966, 14 banks formed Interbank, a new association with the ability to exchange information on credit card transactions.
The following year, four California banks opened its memberships to other financial institutions in the Western U.S. (Western States Bankcard Association). The product was known as MasterCharge. They have purchased the right to use this name from First National Bank of Louisville (currently known as National City Bank of Kentucky).
The WSBA licensed Interbank to use the MasterCharge name and Logo. In the late 1960's, numerous financial institutions became MasterCharge members to compete with BankAmericard.
The first use of magnetic stripes on cards was in the early 1960's, when the London Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper based ticket the same size as the credit cards in the late 1960's. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age.

In 1977 the name Visa was adopted internationally to cover all these cards. VISA became the first credit card to be recognized worldwide.

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