Credit Cards: Past, Present, and Future

Do you know anyone who doesn’t have a credit card (or credit cards)? Most of us don’t, but have you ever thought about how these little plastic cards became so widespread and now, may be even more common than cash?

Many people know that the widespread use of credit cards began in the 1950s, but many don’t realize companies were extending credit to consumers as early as the 1800s.

Credit Coins and Charge Plates

During the late 1800s and early 1900s, merchants and consumers were using the concept of credit to do business. The idea, give customers small celluloid or metal coins/plates with identifying information, which would allow them to make purchases.

Though the concept of credit has been used for quite a long time, this early method is just the predecessor to the modern plastic cards we know today. These coins/plates were issued by specific stores, oil companies, hotels, etc. and could only be used at the respective issuer. This type of credit is more about customer loyalty and creating an experience for shoppers.

In 1940s, some banks had their own charge cards, issued only to members of the bank and only usable locally. The bank cards further extended the development of credit cards because cards were now issued by a bank, rather than by a specific store. 

Necessity is the Mother of Innovation

This familiar proverb perfectly explains the birth of the modern credit card. Frank McNamara, a New York businessman, was out to dinner with clients in 1949 when he realized he had forgotten his wallet at home. In this instance, luckily, he was able to have his wife bring cash, but in his frustration he vowed to come up with another way.

Frank’s answer…The Diner’s Club card, which could be used at multiple locations. It was the first independent credit card company, issuing credit cards for entertainment and travel use. Within its first year, the company had 10,000 cardholders and was accepted at 28 restaurants and 2 hotels throughout New York City.

1958 and Beyond

 The Diner’s Club card was without competition for its first eight years, but in 1958 American Express and Bank Americard (later Visa) introduced their own universal credit cards.

As credit card usage increased and spread across the country, more and more companies and cards were introduced.

21st Century and the Future of Payments

Today, there are more credit cards available than one can count and at least 80% of consumer spending in the US is cashless. In the past year, we’ve also seen payments go digital.

Digital wallets are the newest payment innovation, but no company has come up with the right solution. Apple Pay may be the most likely to succeed, but still in its first few months it has not delivered the widespread usage that many expected.

As consumer habits change, payment companies are challenged to provide solutions that will be convenient and easy for users. Moving forward, the newest innovations will need to solve consumer problems just like Frank McNamara did in 1949.