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How the First Credit Card Came to Be

In America, credit card history isn’t something most people think about. This is because credit, and thus credit cards, seem to be a timeless method of payment. However, the use of plastic payments is, for the most part, a twentieth century luxury. At the dawn of the 20th century, there wasn't much of a system or practice to credit, at all. Today, however, most habitually rely on the convenient use of plastic to secure a variety of services and items. How did credit become so prevalent, and who invented the first credit card?

Early Systems of Credit

During the 1920’s, the use of credit was regularly practiced in both the hotel, as well as the oil industries who commonly extended credit to their fondest customers. This practice then allowed patrons to pay for purchases or services later. Credit was first offered only from merchant to customer, who had to repay their debts directly with the original merchant.

Replicating the successes of hotel and oil companies, stores began offering lines of credit to attract new customers and boost customer loyalty. As a new concept of credit began to become more popular, merchants formed groups based on agreements to accept credit purchases from consumers with cards, all involving stores within their associations. This alliance allowed customers the luxury of shopping at a wider number of stores while using the same agreement they enjoyed with the original merchant.

Early Charge Cards

John Briggins later created the charge card when he introduced the “Charge-It” program in the mid-1940s, which permitted merchants to directly deposit sales slips at their bank and, in turn, the bank would then bill that merchant’s credit customers. Just a few short years after that, the Diner’s Club card was introduced, which allowed customers to enjoy dining at their choice of 27 restaurants throughout New York, but pay their bill later. Even though the “Charge-It” arrangement, as well as the Diner’s Club agreement share a role in the history, which laid the foundation for credit cards as we know them today, neither of these is considered to be a true credit program. At that time, customers had to pay the entire amount due at each billing. Of course, this is in contrast to installment payments currently accepted by most credit card companies today. Such affords customers the opportunity to carry balances over several months. Each of these early programs, though, has its place in the invention of true credit cards, as these programs are the conceptual foundations upon which today’s credit system was eventually created.

American Express and Bank of America Take Credit to New Heights

In 1958, American Express offered their premier charge card with Bank of America debuting the Bankamericard later that year. Soon after this the Bankamericard was re-named as the Visa card and is actually the first credit card to be almost universally used by consumers and accepted by merchants across America, as well as other countries.

Credit Cards Then and Now

Recalling the invention of the credit card unveils a perfect illustration of how rapidly strong business ideas will spread and transform how business is done worldwide. In a short amount of time, the credit card became an incredibly popular and convenient tool that's frequently used in the marketplace. Knowing their purpose, and how they came to exist, gives better perspective on their use and function today.

Tags: American Express, Bank of America, bankamericard, charge cards, credit card, credit card history, Credit Cards, diners club, history of credit, visa