The history of credit cards The history of credit cards The history of credit cards By Ben Woolsey and Emily Starbuck Gerson Share this Story: Tweet As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It wasn't until about half a century ago that plastic payments as we know them today became a way of life. Early beginnings In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled " Credit Cards and Payment Efficiency ." Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service, Sienkiewicz says. The first bank card, named "Charg-It," was introduced in 1946 by John Biggins, a banker in Brooklyn, according to MasterCard . When a customer used it for a purchase, the bill was forwarded to Biggins' bank. The bank reimbursed the merchant and obtained payment from the customer.

The catches: Purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins' bank. In 1951, the first bank credit card appeared in New York's Franklin National Bank for loan customers. It also could be used only by the bank's account holders. The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he'd forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use. Plastic debuts By 1951, there were 20,000 Diners Club cardholders. A decade later, the card was replaced with plastic.

Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month. According to its archivist, American Express formed in 1850. It specialized in deliveries as a competitor to the U.S. Postal Service, money orders (1882) and traveler's checks, which the company invented in 1891. The company discussed creating a travel charge card as early as 1946, but it was the launch of the rival Diners Club card that put things in motion. In 1958 the company emerged into the credit card industry with its own pruduct, a purple charge card for travel and entertainment expenses. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid). American Express soon introduced local currency credit cards in other countries. About 1 million cards were being used at about 85,000 establishements within the first five years, both in and out of the U.S. In the 1990s, the company expanded into an all-purpose card.

American Express, or Amex as it often is called, is about to celebrate its 50th credit card anniversary. Closed-loop system The Diners Club and American Express cards "functioned in what is known as a 'closed-loop' system, made up of the consumer, the merchant and the issuer of the card," Sienkiewicz writes. "In this structure, the issuer both authorizes and handles all aspects of the transaction and settles directly with both the consumer and the merchant." In 1959, the option of maintaining a revolving balance was introduced, according to MasterCard. This meant cardholders no longer had to pay off their full bills at the end of each cycle. While this carried the risk of accumulating finance charges, it gave customers greater flexibility in managing their money. Bank card associations "The general-purpose credit card was born in 1966, when the Bank of America established the BankAmerica Service Corporation that franchised the BankAmericard brand (later to be known as Visa ) to banks nationwide," Sienkiewicz writes. In 1966, a national credit card system was formed when a group of credit-issuing banks joined together and created the InterBank Card Association, according to MasterCard.

The ICA is now known as MasterCard Worldwide, though it was temporarily known as MasterCharge. This organization competes directly with a similar Visa program. "The new bank card associations were different from their predecessors in that an 'open-loop' system was now created, requiring interbank cooperation and funds transfers," Sienkiewicz says. Visa and MasterCard still maintain "open-loop" systems, whereas American Express, Diners Club and Discover Card remain "closed-loop." Visa and MasterCard's organizations both issue credit cards through member banks and set and maintain the rules for processing. They are both run by board members who are mostly high-level executives from their member banking organizations. As the bank card industry grew, banks interested in issuing cards became members of either the Visa association or MasterCard association. Their members shared card program costs, making the bank card program available to even small financial institutions. Later, changes to the association bylaws allowed banks to belong to both associations and issue both types of cards to their customers. Credit card processing evolves As credit card processing became more complicated, outside service companies began to sell processing services to Visa and MasterCard association members.

This reduced the cost of programs for banks to issue cards, pay merchants and settle accounts with cardholders, thus allowing greater expansion of the payments industry. Visa and MasterCard developed rules and standardized procedures for handling the bank card paper flow in order to reduce fraud and misuse of cards. The two associations also created international processing systems to handle the exchange of money and information and established an arbitration procedure to settle disputes between members. Other issuers join the party Although American Express was among the first companies to issue a charge card, it wasn't until 1987 that it issued a credit card allowing customers to pay over time rather than at the end of every month. Its original business model focused on the travel and entertainment charges made by business people, which involved significant revenue from merchants and annual membership fees from customers. While these products are still in its tool chest, the company has developed numerous no-annual fee credit cards offering low introductory rates and reward programs, similar to as traditional bank cards. Another relatively recent entry into the card business is Discover Card, originally part of the Sears Corporation. According to Discover, its first card was unveiled at the 1986 Super Bowl.

Discover Card Services sought to create a new brand with its own merchant network, and the company has been successful at developing merchant acceptance. A 2004 antitrust court ruling against Visa and MasterCard -- initiated by the U.S. governement and the Department of Justice -- changed the exclusive relationship that Visa and MasterCard enjoyed with banks. It allows banks and other card issuers to provide customers with American Express or Discover cards, in addition to a Visa or MasterCard. The future The ongoing switch to EMV compliant chip cards is the biggest change in the traditional credit card. It involves sending hundreds of millions of chip-bearing cards to consumers, and new chip-reading card terminals being installed at merchants across the country. However, it still relies on a a physical card, While the plastic card has been the standard for a half century, recent developments show alternative forms of payment rising to prominence, including online services such as PayPal, credit card keyfobs, cellphone apps and payment chips implanted into other devices. But with the sheer volume of cards in use around America, the "card" in "credit card" is likely to stick around for several years to come. ADVERTISEMENT Join the discussion We encourage an active and insightful conversation among our users.

Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused. If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below. The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered. Three most recent Innovations, features, new products stories: The history of credit cards The history of credit cards October 1, 2015 by EBungert Leave a Comment By Ben Woolsey and Emily Starbuck Gerson As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency.

It wasn’t until about half a century ago that plastic payments as we know them today became a way of life. Early beginnings In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled “ Credit Cards and Payment Efficiency .” Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service, Sienkiewicz says. The first bank card, named “Charg-It,” was introduced in 1946 by John Biggins, a banker in Brooklyn, according to MasterCard . When a customer used it for a purchase, the bill was forwarded to Biggins’ bank. The bank reimbursed the merchant and obtained payment from the customer. The catches: Purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins’ bank. In 1951, the first bank credit card appeared in New York’s Franklin National Bank for loan customers.

It also could be used only by the bank’s account holders. The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York’s Major’s Cabin Grill. When the bill arrived, Frank realized he’d forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major’s Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use. Credit Card Credit Card 1946 Main Image: For the lazies of the World (including your truly), there is no greater financial organization tool innovation than Credit Credit card. Can you imagine what we would have to go through to keep our finances in order and not to mention the hassle of having to keep our wallets stuffed with cash just enough to address any situation? Not to mention the ability to spend cash without having to balance the check book.

All this good comes with a little of the bad, which is unbridled spending because why let the cast just sit there, when the companies are lending them to us.., As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It wasn't until about half a century ago that plastic payments as we know them today became a way of life. How were Credit Cards invented? In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled "Credit Cards and Payment Efficiency." Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service, Sienkiewicz says. The first bank card, named "Charg-It," was introduced in 1946 by John Biggins, a banker in Brooklyn, according to MasterCard. When a customer used it for a purchase, the bill was forwarded to Biggins' bank.

The bank reimbursed the merchant and obtained payment from the customer. The catches: Purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins' bank. In 1951, the first bank credit card appeared in New York's Franklin National Bank for loan customers. It also could be used only by the bank's account holders. The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York's Major's Cabin Grill. When the bill arrived, Frank realized he'd forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major's Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes , it claims the title of the first credit card in widespread use. When were Plastic Credit Cards introduced?

By 1951, there were 20,000 Diners Club cardholders. A decade later, the card was replaced with plastic . Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month. According to its archivist, American Express formed in 1850. It specialized in deliveries as a competitor to the U.S. Postal Service, money orders (1882) and traveler's checks, which the company invented in 1891. The company discussed creating a travel charge card as early as 1946, but it was the launch of the rival Diners Club card that put things in motion. In 1958 the company emerged into the credit card industry with its own pruduct, a purple charge card for travel and entertainment expenses. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid). American Express soon introduced local currency credit cards in other countries.

About 1 million cards were being used at about 85,000 establishements within the first five years, both in and out of the U.S. In the 1990s, the company expanded into an all-purpose card. American Express, or Amex as it often is called, is about to celebrate its 50th credit card anniversary. Charge it! | Restaurant-ing through history Restaurant-ing through history The advent of travel and entertainment (T&E) credit cards in the 1950s was instrumental in sparking a renaissance in luxury restaurants that hadn’t been seen since pre-Prohibition days. Nowhere was the effect felt more strongly than in NYC, birthplace of the Diners’ Club. On February 8, 1950, Frank McNamara paid for his lunch at a steak house called Major’s Cabin Grill in NYC with a Diners’ Club card numbered 1,000 (i.e., #1). With his little paper card he made the very first charge on a nationwide credit card. The timing of the Diners’ Club launch was perfect.

During World War II expense accounts had proliferated as a way companies could use income for entertaining clients rather than hand it to the government as a tax on “excess” profits (profits greater than those before the war). Now, in 1950, the excess profits tax lifted at the end of WWII was only a few months away from reinstatement for the Korean War. The growth of T&E credit cards went hand in hand with the growth of expense accounts. As one publication put it, credit cards were spinoffs of expense accounts. And, each time the IRS tightened up its requirements for itemizing deductions, more credit card applications came in. Unlike the nationwide bank cards that would eventually swamp T&E cards, the latter required high financial standing, an annual membership fee, and full payment of balances within 30 days. Having one of these cards brought cachet. Following quickly on the heels of the Diners’ Club launch came many others: Dine ’n Sign, National Credit Card, Your Host, Inc, Duncan Hines’ Signet Club, the American Hotel Association’s Universal Travelcard, Hilton’s Carte Blanche, the Esquire Club, and the Gourmet Guest Club (the last two linked to Esquire and Gourmet magazines).

A smaller Diners’ Club continues today, but the only other survivor is American Express, which inaugurated its credit card in 1958, then quickly rose to the top of the T&E field. Traveling salesmen and men (rarely women) in industries such as public relations, advertising, publishing, manufacturing, and wholesaling were fans of the convenience of charging business meals. And, of course, in the early days of T&E club cards it was a status factor to simply dash off a signature on a slip, particularly if the lunch took place in a top restaurant. Expense accounts and credit cards were a boon to restaurants. There were estimates that in the mid-1950s 50% to 80% of meals in high-priced restaurants were “on the company.” Vincent Sardi admitted that a big chunk of his NYC business was made up of men on expense accounts.

Peter Canlis, of Seattle’s first-class Canlis Restaurant, said in 1953 that he decided to establish a restaurant there because “a lot of good expense account money wasn’t being spent because there was no place fancy enough to gobble it up – and I was happy to fill the gap.” But not all restaurateurs were enamored of the cards at first. For one thing, Diners’ charged a 7% fee on transactions. Restaurant owners felt that they spent too long waiting for their payments and that they had to raise prices to make up for the fees, thus punishing cash customers. Some restaurants refused Diners’ Club cards or added surcharges for meals paid with them. The Diners’ Club lowered its transaction fees in 1966. By 1965 the three biggest T&E cards, Diners’ Club, American Express, and Carte Blanche claimed a total of about 3.15M cardholders, a small fraction of the number of cards starting to be doled out then, often unsolicited, by nationwide bankcards.

© Jan Whitaker, 2013 Timeline History of the Credit Card | finder.com.au History of the Credit Card – Tale Of The Credit Card Over Time Information verified correct on January 18th, 2017 Credit cards are now an everyday part of life for so many of us, but where did it all begin? It’s easy to take credit cards for granted. They’re a fast, secure and popular payment option and, much like the toothbrush or the doorknob, who ever really wonders about how these everyday things came about? But the history of credit cards is filled with fascinating details and facts, which we explore in detail with this throwback to the birth and evolution of the credit card. The credit card timeline To start, we go back to the early 20th century, round about the same time synthetic plastics (which helped give credit cards their nickname) were invented. Early forms of credit (1900s to 1930s) 1900s. Carried over from the late 19th century, charge coins were the earliest recorded forms of credit.

Large merchants such as hotels, department stores and petrol companies would issue their regular customers with charge coins to use with their store charge accounts. These coins took all shapes and forms, and were made out of metal or celluloid, bearing the customer’s charge account number and merchant’s name and logo for easy imprinting on sales slips. Since there were no other identification marks on the charge coins, they could be easily stolen and used for fraud. 1930s. Charga-plates came next, taking the form of a rectangular metal plate that closely resembled a military dogtag. The Charga-plate bore the customer’s name, address, account number and sometimes their signature, which was more helpful for preventing fraud. However, this form of credit was still only issued by large merchants, and could only be used in the issuing store. Charge cards and credit cards (1940s to 1960s) 1940s. In 1946, banker John Biggins developed the Charg-it card, which marked the first banking attempt to issue a card which customers could use at more than one merchant store.

Issued by the Flatbush National Bank of Brooklyn in New York, customers could use this card at a range of merchants within the state and the bank would settle payments with merchants on their behalf. 1950s. About four years after that, Frank McNamara and Ralph Schneider issued the first Diners Club card in 1950. These cards were made of cardboard and could be used in participating restaurants. Cardholders paid an annual fee of USD$3 while restaurants paid 7% on transaction values. This was still a charge card and not a credit card per se, in the sense of offering revolving credit. In 1958, American Express launched its travel and entertainment card in competition with the Diners Club card, while Bank of America launched its first BankAmericard (later renamed Visa in 1976) in Fresno California. Whereas Diners Club and American Express issued charge cards, Bank of America issued credit cards that allowed its customers to pay for their purchases in monthly instalments with accruing interest (or “carrying charges”). 1960s. Around 1965, Bank of America started licensing their Californian credit card system to banks across America.

This move also led to the formation of a national bank card association for enabling nationwide use of the BankAmericard (often seen as the beginnings of Visa). In 1966, MasterCharge (renamed MasterCard in 1979) jumped on the scene as a cooperative of Northeastern banks wishing to honour cards issued by one another. These two card schemes have gone head-to-head ever since. Credit cards come to Australia (1970s) 1970s. Before 1974, only store-issued cards (which could be used exclusively in the issuing store) were used in Australia, with a small number of Diners Club and American Express credit cards accessible to the wealthy. In 1974, the Bankcard was launched through joint efforts by Australian banks. Working together, they had developed their own card network and implemented the technology needed for a nationwide shared facility. Each bank issued its own bank-branded Bankcard and enforced its own card regulations and customer relations. The Bankcard was a hit here. By 1976, there were 1,054,000 Bankcard holders and almost 49,000 participating merchants.

The first ATMs began popping up in Australia in 1977, and by 1978 Bankcards could be used across the nation. The global credit card market (1980s to 1990s) 1980s. In 1980, Bankcard signed a co-branding agreement with Visa and MasterCard to enable international usability. But this was a false start, with that agreement quickly dissolving in the same year. In 1983, the EFTPOS system was launched in Australia, and Bankcard was successfully introduced in New Zealand. This led to card circulations of more than 5 million by 1984. At the same time, both Visa and MasterCard were launched internationally, which spelled the rise of international credit cards in Australia, and the beginning of Bankcard’s decline among a nation of increasingly sophisticated globetrotters. 1990s. By 1994, Bankcards had shrunk in circulation to 3.9 million, a trend which would lead to its subsequent end in 2007.

However, credit cards kept growing in popularity, helped by the invention of telephone and Internet banking in the mid-1990s and specifically BPAY in 1997. The rise of rewards cards and complimentary extras (2000s to present) 2000s. This millennium marked the rise of the rewards credit card , where frequent flyer points and complimentary extras have significantly come to prominence among credit card users. The demand for frequent flyer credit cards has really soared in the 21st century, with savvy travellers monetising their daily expenditure to finance more travel. Complimentary extras like free travel insurance, airport lounge access and airport chauffeuring services have also become necessary amenities today. Fraud concerns (2000s to present) 2000s. Credit cards have both thrived and suffered alongside rapid technological advancements over the last two decades. Chip-and-PIN card technology, contactless payments, mobile banking and Internet shopping have also borne higher incidences of credit card fraud and scamming . Phishing, skimming and hacking all became significant threats that took the focus off old-school physical theft.

But to their credit, card companies, banks and governments have diligently tried to address these issues with their own set of inventions. This led to the rise of policies, services and tools including zero liability protection, fraud monitoring services, government support services and federal investigations into criminal card activity. Phasing out credit cards 2010s. The advent of mobile technology has allowed cardless cash withdrawals and cardless payments with mobile devices, allowing users to slim their wallets. The next move is towards cardless payments altogether, where we will be doing away with cards and using our smartphones and other devices to pay instead via “wallet” apps. Current credit card trends As of June 2016, more than 70% of Australian adults own credit cards, with more than 16 million credit cards in circulation and a national debt of over $32 billion accruing interest (you can read more stats here ). Current card trends include: Introductory offers. This is a very popular and effective way of enticing new cardholders, where card companies offer attractive deals such as “bonus sign-up points” or “0% interest” introductory periods if you sign up by a certain date. Dual credit cards.

These accounts are popular among rewards seekers, offering two cards linked to the same account. This typically means an American Express credit card to accompany a Visa or MasterCard option, and is designed to maximise your rewards points. You pay only one annual fee for this type of account, although it’s usually on the high side. Contactless payments. While once the realm of speculation and science fiction, contactless payment methods like Visa PayWave and Mastercard PayPass have had us tapping instead of swiping for a few years now. $0 foreign transaction fee cards. This is a feature that gained popularity together with frequent flyer cards and travel credit cards , where jetsetters these days rely on plastic while travelling and seek out cards that don’t charge foreign transaction fees or currency conversion fees for swiping abroad. Annual fees. There has been a widening division in sentiment towards annual fees, with many premium cards charging higher annual fees for their perks, matched by a growing consumer interest in cards promising no annual fee for life. Security.

Common credit card security features now include two-step protocols like the chip-and-PIN verification technology which lowers card theft incidence, or online verification systems that use a one-time password sent to your mobile phone that must be keyed in before an online transaction can take place. Card companies have whole teams monitoring your transactions for suspicious, irregular activity, while card schemes have protective zero liability policies that cover you in the event of fraud. Online payment services. With Internet banking and mobile banking prevalent among consumers, online payment services have also evolved. Payment gateways like PayPal, SecurePay and eWay now offer even more secure ways to pay using your credit card. Credit card debt. Unfortunately, credit card debt has also risen with usage. According to the ASIC credit card debt clock, the average debt per credit cardholder currently stands at around $4,300, which will cost $2,139 in interest over 5 years at 18% p.a. Considering that the average credit cardholder has 2.19 credit cards, this is a cause for concern. Credit cards have come a long way since the early days of charge coins.

While they offer so many modern conveniences and amenities, it’s important that we remember to use them as tools that will benefit us in the long run. Was this content helpful to you? No Yes The History of credit cards - Welcome Qatar Welcome Qatar Who Invented Credit Cards? Credit is a method of selling goods or services without the buyer having cash in hand. A credit card is only an automatic way of offering credit to a consumer. Today, every credit card carries an identifying number that speeds shopping transactions. Imagine what a credit purchase would be like without it, the sales person would have to record your identity, billing address, and terms of repayment. According to Encyclopedia Britannica, “the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers.” However, references to credit cards have been made as far back as 1890 in Europe. Early credit cards involved sales directly between the merchant offering the credit and credit card, and that merchant’s customer. Around 1938, companies started to accept each other’s cards. Today, credit cards allow you to make purchases with countless third parties.

Credit Card Timeline The History of credit cards As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency. It wasn’t until about half a century ago that plastic payments as we know them today became a way of life. Related Article: How To Get Out of Credit Card Debt Early beginnings In the early 1900s, oil companies and department stories issued their own proprietary cards, according to Stan Sienkiewicz, in a paper for the Philadelphia Federal Reserve entitled “Credit Cards and Payment Efficiency.” Such cards were accepted only at the business that issued the card and in limited locations. While modern credit cards are mainly used for convenience, these predecessor cards were developed as a means of creating customer loyalty and improving customer service, Sienkiewicz says. The first bank card, named “Charg-It,” was introduced in 1946 by John Biggins, a banker in Brooklyn, according to MasterCard. When a customer used it for a purchase, the bill was forwarded to Biggins’ bank. The bank reimbursed the merchant and obtained payment from the customer.

The catches: Purchases could only be made locally, and Charg-It cardholders had to have an account at Biggins’ bank. In 1951, the first bank credit card appeared in New York’s Franklin National Bank for loan customers. It also could be used only by the bank’s account holders. The Diners Club Card was the next step in credit cards. According to a representative from Diners Club, the story began in 1949 when a man named Frank McNamara had a business dinner in New York’s Major’s Cabin Grill. When the bill arrived, Frank realized he’d forgotten his wallet. He managed to find his way out of the pickle, but he decided there should be an alternative to cash. McNamara and his partner, Ralph Schneider, returned to Major’s Cabin Grill in February of 1950 and paid the bill with a small, cardboard card. Coined the Diners Club Card and used mainly for travel and entertainment purposes, it claims the title of the first credit card in widespread use. Plastic debuts By 1951, there were 20,000 Diners Club cardholders. A decade later, the card was replaced with plastic.

Diners Club Card purchases were made on credit, but it was technically a charge card, meaning the bill had to be paid in full at the end of each month. According to its archivist, American Express formed in 1850. It specialized in deliveries as a competitor to the U.S. Postal Service, money orders (1882) and traveler’s checks, which the company invented in 1891. The company discussed creating a travel charge card as early as 1946, but it was the launch of the rival Diners Club card that put things in motion. In 1958 the company emerged into the credit card industry with its own pruduct, a purple charge card for travel and entertainment expenses. In 1959, American Express introduced the first card made of plastic (previous cards were made of cardboard or celluloid). American Express soon introduced local currency credit cards in other countries. About 1 million cards were being used at about 85,000 establishements within the first five years, both in and out of the U.S. In the 1990s, the company expanded into an all-purpose card.

American Express, or Amex as it often is called, is about to celebrate its 50th credit card anniversary. Closed-loop system The Diners Club and American Express cards “functioned in what is known as a ‘closed-loop’ system, made up of the consumer, the merchant and the issuer of the card,” Sienkiewicz writes. “In this structure, the issuer both authorizes and handles all aspects of the transaction and settles directly with both the consumer and the merchant.” In 1959, the option of maintaining a revolving balance was introduced, according to MasterCard. This meant cardholders no longer had to pay off their full bills at the end of each cycle. While this carried the risk of accumulating finance charges, it gave customers greater flexibility in managing their money. Bank card associations “The general-purpose credit card was born in 1966, when the Bank of America established the BankAmerica Service Corporation that franchised the BankAmericard brand (later to be known as Visa) to banks nationwide,” Sienkiewicz writes. In 1966, a national credit card system was formed when a group of credit-issuing banks joined together and created the InterBank Card Association, according to MasterCard.

The ICA is now known as MasterCard Worldwide, though it was temporarily known as MasterCharge. This organization competes directly with a similar Visa program. “The new bank card associations were different from their predecessors in that an ‘open-loop’ system was now created, requiring interbank cooperation and funds transfers,” Sienkiewicz says. Visa and MasterCard still maintain “open-loop” systems, whereas American Express, Diners Club and Discover Card remain “closed-loop.” Visa and MasterCard’s organizations both issue credit cards through member banks and set and maintain the rules for processing. They are both run by board members who are mostly high-level executives from their member banking organizations. As the bank card industry grew, banks interested in issuing cards became members of either the Visa association or MasterCard association. Their members shared card program costs, making the bank card program available to even small financial institutions. Later, changes to the association bylaws allowed banks to belong to both associations and issue both types of cards to their customers. Credit card processing evolves As credit card processing became more complicated, outside service companies began to sell processing services to Visa and MasterCard association members.

This reduced the cost of programs for banks to issue cards, pay merchants and settle accounts with cardholders, thus allowing greater expansion of the payments industry. Visa and MasterCard developed rules and standardized procedures for handling the bank card paper flow in order to reduce fraud and misuse of cards. The two associations also created international processing systems to handle the exchange of money and information and established an arbitration procedure to settle disputes between members. Other issuers join the party Although American Express was among the first companies to issue a charge card, it wasn’t until 1987 that it issued a credit card allowing customers to pay over time rather than at the end of every month. Its original business model focused on the travel and entertainment charges made by business people, which involved significant revenue from merchants and annual membership fees from customers. While these products are still in its tool chest, the company has developed numerous no-annual fee credit cards offering low introductory rates and reward programs, similar to as traditional bank cards. Another relatively recent entry into the card business is Discover Card, originally part of the Sears Corporation. According to Discover, its first card was unveiled at the 1986 Super Bowl.

Discover Card Services sought to create a new brand with its own merchant network, and the company has been successful at developing merchant acceptance. A 2004 antitrust court ruling against Visa and MasterCard — initiated by the U.S. governement and the Department of Justice — changed the exclusive relationship that Visa and MasterCard enjoyed with banks. It allows banks and other card issuers to provide customers with American Express or Discover cards, in addition to a Visa or MasterCard. The future While the plastic card has been the standard for a half century, recent developments show alternative forms of payment rising to prominence, from online services such as PayPal to credit card keyfobs to chips that can be implanted into cell phones or other devices. But with the sheer volume of devices in use around America whose sole purpose is to read a flat piece of plastic with a magnetic stripe, the “card” in “credit card” is unlikely to pass from the scene any time soon. If you Know Best Ways To Improve My Credit Score , see this Article. · July 12, 2016 · Do you know what the first credit card was? Most people think the first credit card was the American express card, but it was actually the diners club card.

The idea for Diners Club was conceived at the Majors Cabin Grill restaurant in New York City in 1949. ... Diners Club cofounder Frank McNamara was dining with clients and realized he had left his wallet in another suit. His wife paid the tab, and McNamara thought of a multipurpose charge card as a way to avoid similar embarrassments in the future. He discussed the idea with the restaurant owner at the table, and the following day with his lawyer Ralph Schneider and friend Alfred Bloomingdale. McNamara returned to the same restaurant the following February and paid for his meal using a cardboard charge card and a signature. The story became well-known and is credited by historians as the beginnings of contemporary credit. Various versions of the story differ about whether it was a lunch or dinner at which McNamara forgot his wallet, and whether the bill was paid on loan or McNamara waited for his wife to drive his wallet to him. Some journalists later credited Alfred Bloomingdale with the idea for Diners Club. McNamara and his attorney, Ralph Schneider, founded Diners Club International on February 8, 1950, with $1.5 million in initial capital.

Alfred Bloomingdale joined briefly, then started a competing venture in California before merging his California-based Dine and Sign with Diners Club. Diners Club International was named for being a "club of diners" that would allow patrons to settle their bill at the end of each month through their credit account. When the card was first introduced, Diners Club listed 27 participating restaurants, and 200 of the founders' friends and acquaintances used it. Diners Club had 20,000 members by the end of 1950 and 42,000 by the end of 1951. At the time, the company was charging participating establishments seven percent and billed cardholders $5 a year. In 1952, McNamara sold his interest in Diners Club to his partners for $200,000. The first plastic Diners Club card was introduced in 1961; by the mid-1960s, Diners Club had 1.3 million cardholders. Diners Club International was acquired by Citigroup in 1981 and by Discover Financial Services in April 2008.

In 2004, Diners Club announced an agreement with MasterCard. Diners Club cards issued in the United States and Canada then featured a MasterCard logo and 16-digit account number on the front, and could be used wherever Master Cards were accepted. Cards from other countries continued to bear a 14-digit account number on the front, with the MasterCard logo on the back. However, since the takeover of Diners Club International by Discover Financial Services, these cards have had the Discover logo on the back.

Question: The first credit card charge, using which credit card, was made in February 1950 at Major’s Cabin Grill in New York?
Answer: Diners Club