Credit card

Lore & Background

The concept of charge cards emerged in the late 19th century, with cards made of celluloid, copper, aluminum, steel, and other metals, often shaped like coins with a hole for key rings. These charge coins were given to customers with charge accounts at hotels or department stores. In 1928, the Farrington Manufacturing Company developed the Charga-Plate, a 2½-by-1¼-inch rectangle of sheet metal embossed with the customer's name, city, and state, used with an imprinter to record purchases. Charga-Plates were issued by large-scale merchants to regular customers and sped up bookkeeping.

In 1936, American Airlines and the Air Transport Association introduced the Air Travel Card, which allowed passengers to 'buy now, and pay later' with a discount that typically ranged around 10% (or varied by airline) at accepting airlines. By the 1940s, all major US airlines offered these cards, and eventually the Air Travel Card was accepted by members of the International Air Transport Association, though it was not the first internationally valid charge card—Diners Club later achieved broader international acceptance. In 1950, Ralph Schneider and Frank McNamara founded Diners Club, producing the first 'general purpose' charge card, followed by Carte Blanche and American Express in 1958.

In 1958, Bank of America launched the BankAmericard in Fresno, California, the first successful program recognizable as a modern credit card. It solved the chicken-and-egg problem of merchant and consumer acceptance by sending cards to 60,000 Fresno residents simultaneously. BankAmericard was later licensed to other banks and in 1976 unified under the brand Visa. In 1966, a group of banks created Master Charge to compete, later boosted by Citibank's Everything Card merger in 1969. Early US credit cards were mass-mailed unsolicited to low-risk customers, but the 1970 amendments to the Truth in Lending Act prohibited the unsolicited issuance of credit cards, putting an end to this practice.

Reader's Guide

The credit card fundamentally transformed consumer finance by enabling revolving credit through a third-party bank network, distinct from earlier charge cards that required full monthly repayment. Its development solved a critical coordination problem: consumers would not use a card few merchants accepted, and merchants would not accept a card few consumers used. Bank of America's 1958 mass mailing in Fresno broke this deadlock, creating a model that spread globally through licensing and eventually coalesced into the Visa and MasterCard networks. The 1970 ban on unsolicited mass mailings ended the chaotic 'drops' that had flooded the population with cards, including to high-risk individuals. Antitrust cases, such as the 1978 Supreme Court case Marquette National Bank of Minneapolis v. First of Omaha Service Corp., made the industry more competitive, benefiting consumers. Outside North America, adoption varied: the UK's Barclaycard launched in 1966, but many cash-oriented cultures or those with alternative systems like Carte Bleue or Eurocard were slower to adopt credit cards. By the 1990s, global usage caught up to US levels, though some countries like Japan remain cash-oriented. The credit card's legacy includes enabling installment plans, building consumer debt, and spurring innovations like chip-based anti-fraud devices.

Did You Know?

• The Charga-Plate, developed in 1928, was a 2½-by-1¼-inch rectangle of sheet metal embossed with the customer's name, city, and state, used with an imprinter to record purchases.
• In 1936, the Air Travel Card allowed passengers to 'buy now, and pay later' for tickets with a discount that typically ranged around 10% (or varied by airline) at any accepting airline.
• Bank of America launched the first successful modern credit card, BankAmericard, in Fresno, California in 1958, sending cards to 60,000 residents simultaneously.
• The 1970 amendments to the Truth in Lending Act prohibited the unsolicited issuance of credit cards, putting an end to mass-mailing practices.