A Brief History of Credit Cards

Credit is not a new invention; it has been in use for thousands of years and has been in an ever evolving state.

Credit was first used in Assyria, Babylon and Egypt 3,000 years ago. The bill of exchange - which was a forerunner of banknotes - was established in the 14th century. Debts were settled by one-third cash and two-thirds bill of exchange. Paper money followed in the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called "tallymen" because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shopper's plate - a "buy now, pay later" system - was introduced in the USA. It could only be used in the shops which issued it.

In 1950, Diners Club issued the first credit card (invented by Diners' Club founder Frank McNamara) to 200 customers who could use it at 27 restaurants in New York. American Express followed in 1958. Bank of America issued the BankAmericard (now Visa), the first bank credit card later in 1958. They were first promoted to traveling salesmen for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. On August 16, 1966, a group of issuing banks formed the Interbank Card Association (ICA), which later became MasterCard International. American Express and MasterCard became huge successes overnight, and by the mid-'70s, Congress had to start to regulate the credit card industry by banning such practices as the mass mailing of active cards to those who had not requested them.

But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. Early credit cards required payment in full in less than 90 days. In 1951 Franklin National Bank in New York introduced the first modern credit card to its customers. They extended the repayment period and attached and interest rate creating a new revenue stream. This concept quickly became popular as banks everywhere began issuing credit cards.

Today the use of credit cards is astounding- American credit card debt alone exceeds $550 billion (according to the November 1998 Federal Reserve Board statistics).