Although it may seem almost impossible to live without one today, the credit card is actually a relatively new creation. Just 70 short years ago there was no such thing and all transactions were done using cold, hard cash.
Where it all started
In the early 1900s several department stores and oil companies noted the benefits of having a card that only worked in their establishments. At this point in time the convenience they offered was limited, but they created a powerful culture within their customers: loyalty. Having a card was seen as a status symbol at this time, and companies rested easy knowing that people were given an addition incentive to shop with them considering the card was very simple to provide and cater for.
Maturation of the card as we know it
As time progressed, a visionary banker by the name of John Biggins created something known as a Charg-It card in 1946. The way it worked – with a few exceptions – isn’t too dissimilar to bank cards today and can be credited with creating the modern card culture.
Customers would open an account with Biggins’ bank, and when a purchase was made, the vendor would accept payment through the card which essentially created an IOU. After the transaction was approved, the bank would pay the vendor and debit funds from the customer, but there were a few pitfalls to this approach. Most notable was the fact that you needed to bank with Biggins to use the card, giving him an effective monopoly over the market and allowing rates higher than other banks just for the privilege of being seen with a Charg-It card. The other problem was that all purchases needed to be made locally, rendering it useless at work and on holidays.
Further Maturation of the card as we know it
The first actual credit card was issued by Franklin National Bank of New York, although it suffered with many of the same problems as the Charg-It card. Real progress, however, wasn’t made until the owner of what we now know as the Diners Club went through a problem we all dread. Back in 1949 a New York man, Frank McNamara, had gone out to an enjoyable business dinner, but when it came time to pay the bill he realised that he’d forgotten his wallet at home. Luckily enough, he was able to talk his way out of the dilemma, but on that day Frank noticed a gap in the market: the lack of an alternative to cash. A few months later Frank was in the same restaurant, this time paying with a small cardboard card known as the Diners Club card, and by the same time next year there were over 20,000 owners, cementing the idea as a roaring success.
While the humble credit card has been through several iterations since the days of Frank McNamara, yet the original idea remains to this day: an affordable and convenient way to shop with the added security of not needing to carry cash. Truly one of the most innovative inventions of recent times.
This article was written by the team at Pockit prepaid credit card.
