It’s pretty crazy to think about a world without credit cards. They’ve become such a big part of our lives – and our economy – that it’s tough to remember a time before they existed. But believe it or not, the credit card has been around for more than 150 years.
In this article, let’s dive into the fascinating history of credit cards and how they’ve evolved over the years. We’ll also explore what the future may hold for this essential form of payment. Join me on this journey!
The history of credit is long and complicated.
It’s hard to imagine life without credit cards. With a simple swipe, we can make purchases and pay for services without carrying around cash or writing a check. But how did this system of credit come to be?
The credit card history is long and complicated, with roots that stretch back thousands of years.
First recorded transaction
The first recorded transaction that established the modern credit card system took place 5,000 years ago in Mesopotamia, an ancient civilization known for its invention of the cuneiform writing system.
While there’s no direct evidence that these early tablets were used as credit cards, they did establish a system of exchanging goods and services without using money.
Code of Hammurabi
The Code of Hammurabi, a set of rules written by the king of Babylon in 1792 to 1750 B.C., is one of the earliest recorded examples of a credit system..
The code includes a section on banking and loans, indicating that the concept of credit was already well-established by this time.
Credit Card in ancient Rome
In ancient Rome, meanwhile, people used a form of credit called “neutral” to buy goods and services from distant sellers.
Under this system, the buyer would pay a deposit to the seller, who would then ship the goods to the buyer.
Once the goods were received, the buyer would pay the remainder of the purchase price.
This system was useful for long-distance transactions, but it was slow and cumbersome.
So in the first century A.D., Rome developed a new form of credit called “mancipium.” With marsupium, buyers could take possession of the goods before paying for them.
They would then have a certain amount of time – usually one year – to pay off the debt.
Improvement of Credit Systems in Ancient Rome
While marsupium was an improvement over neutral, it still had its drawbacks. So in the second century A.D., Rome developed yet another form of credit called “traffic.”
Under traffic, buyers could make purchases without having to pay upfront. Instead, they would agree to pay the seller at a later date.
This system of credit was so successful that it spread throughout the Roman Empire. And it laid the foundation for our modern system of credit and debit cards.
Pre-Modern Credit ( 1891 to 1950)
World War I and the Depression
The first credit cards didn’t emerge until 1891 when American Express issued the first Travelers Cheques. These cheques allowed people to travel without having to carry around large amounts of cash.
1914- Western Union launched “Metal Money”
In 1914, Western Union launched “Metal Money,” a precursor to the modern credit card. Metal Money was a physical card that could be used to make purchases at participating stores.
The first credit cards were also introduced in 1914, but they were limited to wealthy customers who could afford the high interest rates. The very first credit card was made of metal!
1930- The Charge Plate Bookkeeping Systems Was Launched
In 1930, the Charge Plate Bookkeeping Systems was launched. This system allowed businesses to track credit card transactions by using metal plates.
1946- Banker Jhon Biggins launches the Charg it Card
In 1946, John Biggins credit cards were invented with the card being named ‘Charge-It’.
This allowed customers to make purchases and have the bill forwarded to Biggins’ bank. The bank would then pay the merchant and get payment from the customer later on.
However, this could only be done locally and Charge-It cardholders needed to have an account at Biggins’ bank.
1950- Dinner Club becomes the First multipurpose Charge Card
In 1950, Frank X. McNamara had an idea for a card that could be used at multiple locations after he forgot his wallet while dining out with clients.
He then founded Diner’s Club which would issue charge cards to its members that could be used at multiple restaurants.
By 1951, over 20,000 people had signed up for Diner’s Club. In 1958, American Express launched its credit card which could be used at a variety of businesses and not just restaurants.
1958- Amex lauches it 1st Charge Card
In 1958, American Express launched its first charge card, which revolutionized the way people paid for goods and services.
The card allowed customers to charge their purchases to their account and then pay the balance in full each month.
This convenience quickly caught on, and within a few years, other companies began offering their versions of the charge card.
The invention of Modern credit cards
1960- IBM engineer Forrest Parry invented the magnetic Stripe.
The magnetic stripe, also known as the mag stripe, is a type of card used for identification purposes.
It is read by swiping the card through a reader and consists of a series of vertical stripes of different widths that are encoded with information.
The most common use of magnetic stripes is on credit cards, debit cards, gift cards, and hotel keycards. Magnetic stripe cards are also used for store loyalty programs, membership clubs, and security identification badges.
The first magnetic stripe card was invented in 1960 by IBM engineer Forrest Parry.
Parry was working on a project for the U.S. government at the time and his wife Dorothea suggested using an iron to melt the stripe onto the card after he explained his difficulty in getting the tape to stick to plastic in a way that would work – and it worked!
The use of magnetic stripes quickly spread across the globe and they are now ubiquitous.
1966- Inter Bank Card association is formed by several Bank
The first consumer credit card was introduced by Diner’s Club in 1950. By the 1960s, several different credit card issuers had emerged, each with its own rules and regulations.
In 1966, a group of these companies formed the Interbank Card Association (ICA), which later became MasterCard International.
Although the role of the CIA was not dominated by a single bank, member committees were created to manage the association.
They established rules for authorization, clearing, and settlement; handled marketing, security, and legal aspects; and set interchange fees between member banks.
The formation of ICA marked an important milestone in the history of credit cards, as it helped to standardize the industry and make credit cards more accessible to consumers worldwide.
1974-Equal Credit Opportunity Act
In 1974, Congress passed the Equal Credit Opportunity Act (ECOA) in response to increased complaints of discrimination in lending. The ECOA made it illegal for lenders to discriminate against borrowers based on race, color, religion, national origin, sex, or marital status.
The act also required lenders to provide applicants with a written statement of the reasons for any adverse action taken on their loan application.
In addition, the ECOA paved the way for the introduction of credit cards for married women and minorities.
Prior to the passage of the ECOA, married women and minorities were often denied access to credit cards because lenders considered them to be high-risk borrowers.
However, the act made it illegal for lenders to discriminate against these groups, opening up the world of credit to millions of Americans.
Today, the ECOA is credited with helping to create a level playing field in the world of credit and lending.
Thanks to this groundbreaking legislation, all American consumers have an equal opportunity to access credit products.
1985-First Discover Credit card purchases made
On September 17, 1985, a Sears employee from the Chicago area made the first credit card purchase with a Discover card at a Sears store in Atlanta. The purchase was for $26.77.
This marked the beginning of a new era in consumer spending. Prior to this, most people used cash or checks to pay for their purchases. Credit cards offered a new way to pay for goods and services.
They were convenient and allowed people to make purchases without carrying large amounts of cash.
1991- American Express launches the First Credit card loyalty program
In 1991, American Express became the first credit card company to launch a loyalty program. The program was called Membership Rewards and it allowed customers to earn points for every dollar they spent on their Amex card.
The points could then be redeemed for rewards such as travel, merchandise, and gift cards. The program was a huge success and helped to solidify American Express’s position as a leader in the credit card industry.
Today, loyalty programs are commonplace among credit card companies. Many offer points or cashback for every purchase made on their card.
These programs have become an important part of the credit card landscape and have helped to drive spending and loyalty among cardholders.
2002-Bank of America, a new “mini card”
In 2002, Bank of America started a new trend of mini cards. Keychain-sized versions of traditional cards became popular.
The idea was to easily attach the card to a keychain and to provide a more convenient way to make a purchase.
The mini cards carried the bank’s zero-liability policy for unauthorized use of lost or stolen cards and could be used at any point-of-sale terminal with the “swipe” reader. The mini cards also carried the VISA Brand.
This new trend caught on and soon many other banks were offering mini cards to their customers. today, the convenience of these cards has made them a popular choice for many people.
Thanks to Bank of America’s innovation, carrying a credit card is now easier than ever.
2008-Mobile Wallet
In 2008, Apple introduced the iPhone and with it, the App Store. This gave developers a new way to create and distribute apps and opened up a whole new world of possibilities.
One of the most popular categories of apps is mobile wallet apps. These apps allow users to store their credit card information on their phones and use it to make purchases at participating retailers.
Mobile wallet apps are convenient for consumers and offer a safe and secure way to pay for goods and services.
They also have the potential to greatly reduce fraudulent activity. For these reasons, mobile wallet apps are becoming increasingly popular and are expected to play a major role in the future of credit cards.
2009- Credit card Act 2009 is enacted.
In 2009, the Credit Card Act was enacted to protect consumers from some of the more predatory practices of the credit card industry.
Before the Act, credit card companies were able to raise rates without warning, impose hidden fees, and lure customers into taking on more debt than they could afford.
The Credit Card Act put an end to these practices by requiring that companies give 45 days’ notice before increasing rates, banning unfair fees, and making it more difficult for young adults to obtain credit cards.
As a result of the Act, consumers are now better protected against the harmful practices of the credit card industry. However, many experts believe that there is still more work to be done to ensure that consumers are treated fairly.
2014- Apple launches Apply Pay
In 2014, Apple launched Apple Pay, a new way to pay for goods and services using your iPhone or Apple Watch. With Apple Pay, you can easily and securely make payments at participating stores, online, or in apps.
Apple Pay is just one example of how credit cards are constantly evolving to meet the needs of consumers.
Thanks to innovations like this, it’s safe to say that credit cards are here to stay.
2022-Mastercard and Nexo launch a first crypto credit card
In 2022, Mastercard and Nexo launched the first crypto credit card, which allows cardholders to spend without having to sell their digital assets, such as Bitcoin.
The card is linked to a user’s Nexo Wallet and enables them to spend their cryptocurrency without having to convert it into fiat currency.
The card can be used anywhere that Mastercard is accepted and also allows users to earn cashback in Nexo’s native token, NEXO.
The launch of the crypto credit card marks an important milestone in the history of credit cards and the adoption of cryptocurrencies. It is also a sign of the growing popularity of cryptocurrency as a form of payment.
Regulation and litigation of Credit Card
The history of credit cards is filled with examples of regulation and litigation. Credit card companies have been accused of nickel and diming customers with hidden fees, increasing rates without warning, and luring people into taking on more debt than they can afford.
As a result, legislation aimed at protecting consumers has been enacted, such as the Credit Card Act of 2009. In addition, there have been numerous lawsuits filed against credit card companies.
Here are some of the regulatory courses and the most notable lawsuits:
Truth In Lending Act (1968)
The Truth in Lending Act was passed in 1968 to safeguard consumers against deceptive credit card billing practices. The law applies to all loans, not just credit card loans.
Under the act, banks must disclose the rates and fees of a loan so that consumers can compare shops. TILA also allows someone to back out of a loan within three days.
While the act has helped to protect consumers from some predatory lending practices, it has also created confusion about what rates and fees are reasonable. As a result, many people find themselves caught in a cycle of debt that they can’t escape.
In addition, the act does not cover every possible lending situation, leaving some consumers vulnerable to unfair practices.
Despite its shortcomings, the Truth In Lending Act is an important piece of legislation that has helped to protect consumers from predatory lenders.
Fair Credit Billing Act (1974)
The Fair Credit Billing Act (FCBA) was passed in 1974 to help protect consumers from unfair billing practices on open-end credit accounts. This includes credit cards, charge cards, and home equity loans.
Under the FCBA, eligible borrowers can dispute any charges they believe to be incorrect. This might be unauthorized charges or goods/services not received. If you decide to dispute a charge, your creditor is not allowed to report your account as delinquent.
There are also guidelines in place for how both parties should handle the situation. By familiarizing yourself with the FCBA, you can help ensure that you’re not taken advantage of by your creditors.
Fair Debt Collection Practices Act (1977)
Unfortunately, many people are familiar with the harassing phone calls and threatening letters that can come from debt collectors.
What they may not know is that there are laws in place to protect them from this type of behavior.
The Fair Debt Collection Practices Act of 1977 is a federal law that prohibits third-party debt collectors from using abusive, unfair, or deceptive practices when collecting a debt.
This includes things like making repeated phone calls, using profane language, making threats of violence, or publishing a list of names of people who owe money.
If a debt collector violates this law, the consumer has the right to sue them. As a result, the Fair Debt Collection Practices Act provides important protections for consumers and helps to hold debt collectors accountable for their actions.
Card Act 2009
The Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, added further consumer protections to the Truth in Lending Act.
Among its protections were rules regarding the frequency and amount a lender could increase interest rates on a loan.
The CARD Act ended the practice of marketing credit cards to young people on college campuses, including limited access to accounts for those under 21 without a cosigner.
The CARD Act was a response to the widespread abuses that had become commonplace in the credit card industry. Lenders had taken advantage of consumers by raising rates unexpectedly and without notice.
They had also engaged in deceptive marketing practices, such as offering low introductory rates that would later skyrocket. The new law put an end to these practices and helped to protect consumers from unfair credit card fees and terms.
While the CARD Act has been successful in curbing some of the abuses in the credit card industry, it has not eliminated all of them.
For example, lenders can still charge high late fees and penalty interest rates. And they can still offer rewards programs that encourage consumers to spend more than they can afford.
As a result, it is important for consumers to stay vigilant when using credit cards and to be aware of their rights under the law.
What’s next for credit cards?
The history of credit cards is a long and fascinating one. Credit cards first appeared on the scene in the early 1900s, and they’ve undergone a lot of changes since then.
Today, credit cards are an essential part of life for many people, and they show no signs of going away anytime soon. So what’s next for credit cards?
Here are a few trends to watch out for:
• Blockchain technology is being used in combination with credit cards in several ways, including rewards programs and purchase options for select shares of cryptocurrency.
• The indelibility of blockchain technology makes it a likely replacement for the way issuers currently record transactions.
• Users are increasingly turning to mobile wallets and wearable devices instead of traditional credit cards, indicating that contactless payment technology is becoming more popular.
• Artificial intelligence is playing a greater role in how issuers determine risk when approving applications for new credit card accounts.
These are just a few of the many ways that credit cards are evolving. As the world around us changes, so too will the way we use credit cards. It’ll be interesting to see what the next few decades hold for this essential piece of modern life.
