The History of Credit Cards

Credit has been with us since time immemorial. In the old days, stores would keep open accounts, or “tabs”, for their customers. The customers would take the merchandise they needed, the store owner would mark their purchases in a ledger, and the tab would be paid at a later date.

Credit in card form was first mentioned in literature in the 1887 novel, Looking Backward, by Edward Bellamy. The author theorized that, in the future, all customers would need to make purchases was a little card that represented their available credit. Now that was a good guess, and timely: Western Union issued purchase cards to its best customers as early as 1914.

Gas cards came before most other types of credit cards. In the 1920’s, more and more people purchased automobiles. Those automobiles needed fuel, so many gas stations began to issue cards which could be used to make fuel purchases. In an innovative networking move, various gas stations even accepted their competitor’s cards as a form of payment.

Next came store credit cards. Originally devised as a marketing ploy, these cards helped increase the customer base of many retailers. Customers liked the fact that they buy now and pay later, and retailers liked the fact that the period of repayment had a definite limit. That is, the customer had a specific amount of time in which to pay off their debt. Good customers gained a good reputation among merchants – the credit history of yesterday.

Revolving credit came onto the scene in the 1930’s and 40’s. The stores started off by allowing customers to pay off their debt over a series of months, requiring the debt to be paid in full before further purchases could be made. Then they did away with the repayment limits. This allowed customers to carry a balance on their credit cards that did not have to be repaid in a specified time period. Instead, the customer had to repay a certain amount of debt each month – the minimum monthly payment. This provided even more convenience for the customers, though many didn’t quite know what they were getting into. Credit card companies made revenue from fees and interest, just like they do today.

In the 1950’s, Ralph Schneider introduced the concept of an all-purpose credit card which could be used in lieu of multiple charge cards. Enter the cards we know today: Visa, American Express, Diner’s Club, and others. These major companies soared in popularity in the 1970’s and 80’s.

Today, credit cards have become a big business. It seems that every provider is eager to place a card in the hands of a customer, regardless of that customer’s credit score or demonstrated level of financial responsibility. This is good news for consumers who want to build up their credit, but can also mean big losses for an industry that was founded on the strength of a promise.

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