Depending on who you ask you might get a completely different story about when and who invented the credit card. In fact, some historians claim that a similar method of payment was used in Assyria and Egypt over 3,000 years ago.
What is a Credit Card?
To pinpoint the advent of the credit card we must first understand what defines a credit card and sets it apart from credit schemes that existed centuries before the credit card was invented.
A Credit Card is essential a card issued by a financial institution to costumers allowing the customer to purchase goods and services or withdraw cash on credit. A credit card must also be widely accepted by businesses and allows the user to continue to carry a debt (revolving credit) on the card subject to interest charges.
Difference between Credit Cards and other Credit Schemes
An important differentiation between credit cards and credit schemes which existed in the 1800’s and possibly centuries before is that credit schemes required the full balance to be paid each billing period whereas credit cards allow the user to continue to carry a debt subject to interest charges.
Merchant credit schemes or charge cards that were used in the US in the 1920’s and allowed customers to earn credit on their card also differ from credit cards because such charge cards were only accepted at the business or group of businesses that issued the card and was not widely accepted.
Charge Plates, developed in 1928, were the predecessor to modern plastic credit cards and were used in the U.S. from the 1930s to the late 1950s. The Charge plate was a rectangular metal sheet similar to a military dog tag.
Dinners Club Charge Card
The use of a single Charge plate to consolidate multiple cards and pay different merchants with a single card was a big step towards the advent of the credit card and was introduced in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club. The Dinners club charge card, however, was mainly used to pay for meals in restaurants and did not allow the user to continue to carry a debt on the card as is the case with a credit card.
The Advent of the Modern Credit Card
By 1951, there were about 20,000 Diners Club cardholders. In September 1958, Bank of America launched the BankAmericard which became the first successful and widely accepted credit card. In the same year, Amex also launched their own credit card which was also successful and widely accepted.
American Express (Amex) went on to introduce the first plastic credit card in 1959 and BankAmericard with its overseas affiliates eventually evolved into the Visa system. It was not until 1966 that the ancestor of MasterCard was born as Master Charge. MasterCard has since grown to become one of the most widely accepted and used credit card in the world.
Alternative History of Credit Cards
According to MasterCard however, the first bank card called charge-it was first introduced by a banker in Brooklyn, New York by the name of John Biggins but was only available to customers within the neighbourhood. MasterCard also claims that the first credit card was introduced by the New York Franklin national bank in 1950.
The reality is that many attempts at creating a credit card that was widely accepted were made by many small banks in America between 1946 to 1958 and failed. Nowadays credit cards are used in almost every country in the world, so much so, that credit card comparison websites have emerged to help potential customers to filter through the glut of credit cards available.