The average consumer does not think about the long history of the credit cards in their wallet. Today’s sleek, plastic cards are the latest members of an illustrious lineage going back centuries, and they are still evolving.
Nationwide and worldwide plastic credit cards are a fairly recent invention, but they are based on a concept going back centuries. Merchants have long realized that their customers would buy more items if they were allowed to pay for them later, so a mechanism permitting this was advantageous to both merchant and customer. Arrangements for purchases on credit probably go back as far as trading itself, and history recounts several examples dating back to the 18th century.
An example is furniture seller Christopher Thompson, who made the first recorded advertisement for credit in 1730. This was a simple offer to split furniture payments up into weekly installments, an idea that would receive wider use from armies of traveling salesmen for the next two centuries or so.
These worthy individuals took to the road in response to hard economic times, becoming known as "peddlers" or the less complimentary term, "drifters." They sold everything from shoes to kitchen pans, bringing small bits of civilization to rural locales that would otherwise have been completely isolated. Since most of their customers were poor, the only way the traveling salesmen could do any business was by allowing purchases on credit, collecting payment on their next trip through the area.
Both the salesman and his customers were often illiterate, so the standard way of keeping up with a customer’s account was to carve notches on a wooden stick. Notches representing the customer’s debt were cut into one side of the stick, and another row of notches was cut into the other side to represent payments. When the two lines were equal, the debt was fully paid. The sticks were called tallies, and the traveling merchants were the tallymen. This may be the first use of a physical object to represent credit.
As the Industrial Revolution progressed, a middle class emerged and provided a new market for consumer goods and the concept of buying them on credit. This led many British banks in the 19th century to institute overdraft insurance. This a mounted to a credit program, because it allowed customers to overdraw on their bank accounts and pay the excess amount at a later date.
The use of cards as credit vouchers began with Western Union, which in 1914 started issuing small metal plates by which customers could defer payment. Metal was used because this service was seen as benefitting travelers reluctant to carry large amounts of cash, meaning that the cards would be subjected to heavy wear during travel. By modern standards, it was a great deal, since it the overdraft amount did not accrue interest.
Also aiming for travelers, the General Petroleum Corporation began issuing metal credit cards in 1924. This expanded the concept, since it allowed the cardholder to purchase a wide variety of goods and services at automotive service centers in many locations.
As the 20th century proceeded, the idea of nationwide cards for credit became more widespread, but they were always for specific businesses. AT&T’s phone cards came into use in the 1930’s, and the Ford Motor Corporation opened loan offices specifically to help people buy its cars.
However, the concept of the modern credit card, usable at many locations and for a variety of products nationwide, was originated by Diner’s Club, whose cards became a ubiquitous part of American culture in the 1950s.
The first bank to issue cards was New York’s Franklin National Bank in 1951, but their "Charg-It" card could only be used in a limited number of businesses and was not honored nationwide. The modern era of plastic money can be traced to the birth of the American Express Card in 1958.
Other landmarks followed. BankAmericard started the idea of revolving credit by allowing the customer to select different payment plans. Master Charge arose as the other king of credit, later changing its name to MasterCard.
The concept of credit companies and the growing number of functions for their cards continues to evolve in the 21st century, and the cards of tomorrow will far surpass their predecessors.