In America, credit card history isn’t something most people think about. This is because credit, and thus credit cards, seem to be a timeless method of payment. However, the use of plastic payments is, for the most part, a twentieth century luxury. At the turn of that century, a well-organized system and practice of credit simply didn’t exist. Today, however, most habitually rely on the convenient use of plastic to secure a variety of services and items. So, how exactly did the phenomenon known as credit spread so rapidly and who is the person responsible for inventing the first credit card?

Early Systems of Credit

During the 1920’s, the use of credit was regularly practiced in both the hotel, as well as the oil industries who commonly extended credit to their fondest customers. This allowed patrons to pay for goods or services they purchased later. Credit was first offered only from merchant to customer, who had to repay their debts directly with the original merchant.

Replicating the successes of hotel and oil companies, stores began offering lines of credit to attract new customers and boost customer loyalty. As a new credit concept began to grow in popularity with consumers, merchants formed groups based on agreements to do business with consumers by accepting credit purchases on cards from other stores within their group. This joining of forces gave consumers the luxury of shopping at a wide range of stores, while keeping the same agreement they had with the original merchant.

Early Charge Cards

John Briggins later created the charge card when he introduced the “Charge-It” program in the mid-1940s, which permitted merchants to directly deposit sales slips at their bank and, in turn, the bank would then bill that merchant’s credit customers. A few years later, the Diner’s Club card made it’s debut, allowing customers to dine at their choice of 27 restaurants in New York, and settle their bill later. Though the “Charge It” method, and the Diner’s Club agreements share roles in the foundations of the modern system of credit, neither are considered true credit programs. This is because, at that time, customers were bound to paying the whole amount due at each billing. Of course, this is in contrast to installment payments currently accepted by most credit card companies today. This affords consumers the ability to carry balances over several months. Each of these early programs has it’s place in the formation of true credit cards, as they are the conceptual foundations on which the modern credit system is built upon.

American Express and Bank of America Take Credit to New Heights

In 1958, American Express offered their premier charge card with Bank of America debuting the Bankamericard later that year. Soon after this the Bankamericard was re-named as the Visa card and is actually the first credit card to be almost universally used by consumers and accepted by merchants across America, as well as other countries.

Credit Cards Then and Now

Recalling the invention of the credit card unveils a perfect illustration of how rapidly strong business ideas will spread and transform how business is done worldwide. In a short amount of time, the credit card became an incredibly popular and convenient tool that’s frequently used in the marketplace. Understanding their purpose and how they came into being, helps in respecting how they are used today.

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History of the Credit Card