History of the Credit Card

The concept of “credit” is not a new one.

Indeed, the idea of having an “account” with a merchant is one that is hundreds of years old.  In some cases, a community member with some standing and reputation could purchase goods at a store, and the merchant would collect payment at a later time, usually at the end of the month, or at the end of the season.

History of the Credit Card

However, during the late 1800s, charge plates and credit coins were beginning to find popularity.

These could be used for purchases, and payment collected later.

The first credit cards didn’t appear until the 1920s.

Gas stations pioneered them as ways to encourage customer loyalty, since they were initially only good at the issuing station.  Later, gas stations began to accept each other’s cards.

Another precursor to the credit card was the Charga-Plate, which was a metal plate that looked remarkably like a military dog tag.

They were very similar to department store credit cards used today, but often merchants kept them at the store.  When a purchase was made, the embossed metal plate (carrying the customer’s information) was placed in an imprinter with a piece of paper so a record could be made.  The Charga-Plate was unique in that it was made from metal.  Other credit card precursors were made from card stock, cardboard, or celluloid, and were notoriously easy to counterfeit.

One of the most innovative developments in credit card history was the Air Travel Card, which not only provided numbering system as a way to identify the person using the card, but to also identify the issuer.

This card could be used amongst participating airlines.  Not only could consumers use the card to buy a plane ticket and pay later, but using the card gave them a 15% discount — the first reward card.

Expanding the Role of Charge Cards

After a while, it became apparent that it would be more convenient if one card could be used at multiple merchants, rather than getting a charge card for each merchant.

Banks in Brooklyn and New York City began issuing cards that were good at a variety of local merchant establishments (no going out of town).

It certainly made things easier, but what happens if you want to travel with the same level of cash-free convenience?

Enter the Diners Club card.

Many credit the Diners Club card as being the first widely accepted charge card.  This card could be used at dining and other entertainment establishments all over the country, starting in 1950.

American Express later forged a worldwide network that would except its charge card, released in 1958.  A year later, in 1959, American Express introduced the first card made from plastic.

It is important to note that, up until this time, all of these credit arrangements worked as charge cards.  The balance wasn’t revolving; it had to paid off each month.  (Indeed, American Express didn’t issue its first true credit card until 1987.)

The Rise of Credit Cards

history of credit cards

Did you know about the credit card's history?

During the time period up to 1958, many banks had tried — and failed — to create a true credit card that would be accepted by a wide variety of merchants in a wide variety of places.

There just wasn’t enough trust between the banks.

However, Bank of America managed the feat in 1958 with the launch of the BankAmericard.  Over time, the card underwent some changes, and, with the help of affiliates around the world, it evolved into the Visa payment processor.  In 1966, the forerunner to MasterCard was formed.

These interbank associations made it possible for consumers to use their credit cards in a wide variety of ways, rather than being tied down to a specific store, local area, or having to be a customer of a certain bank.  Any member bank could issue the card, and any merchant who was part of the system could accept it.

This revolution is what prompted the launch of credit as we know it today.

Credit Cards Today

Of course, credit cards have evolved further.

We now have rewards credit cards, and a wide variety of programs to choose from.  On top of that, we are moving toward digital wallets, which would allow us to keep our credit cards stored on smart phones and other mobile devices.  We also have online credit systems, such as Bill Me Later.

It will be interesting to see what the future holds for credit.



Philadelphia Fed




Published or updated April 6, 2013.

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