What started as store charge cards evolved into indispensable credit cards in the 1950’s.
It’s hard for most people to imagine life without credit cards. They are a major part of our financial system and our daily lives. While the practice of purchasing on credit using charge coins and other objects started in the late 1800’s, the general use credit card was a 1950’s innovation. Places such as hotels, and department stores would give customers small coins that contained an account number and the merchant’s name. When a customer wanted to purchase on credit an imprint of the coin would be taken for billing.
In 1921 Western Union started issuing charge cards to its regular customers. In the 1940’s oil companies started to use charge cards as well. These types of cards were for use only with the particular company that issued it, and often only at limited locations. The first bank card was called Charg-It and was introduced in 1946 by a Brooklyn banker named John Biggins. The card was only for local use and people were required to have an account at Biggins’ bank. When companies accepted this card for payment they would forward the bill to the bank, which would pay the bill and then collect payment from the customers.
The first general use charge card was developed in 1950 by Ralph Schneider and Frank McNamara, the founders of Diners Club. The story goes that in 1949 Mr. McNamara went out for a business dinner and at the end of the meal found he was without his wallet. He managed to resolve the situation but it started him thinking that there needed to be an alternative to cash as a payment. The card was developed and called Diners Club, due to his experience at the restaurant. In February of 1950 McNamara and his business partner, Schneider, went back to the restaurant and paid the bill with the card, which was made from cardboard. The Diners Card was used primarily for travel and entertainment, but the bill had to be paid in full at the end of the month. By 1951 there were 20,000 cardholders.
In 1958 American Express released the Carte Blanche and eventually set up a worldwide credit card network. It also introduced the first plastic credit cards in 1959. Also that year consumers were given the option to maintain a revolving balance, rather than pay the entire bill.