Credit and Credit Cards, A Short History

For thousands of years, merchants have been offering credit lines to their customers. We know this because there are some very old accounting records found from both the Babylonian and Assyrian cultures. This was around the time of the Bronze Age. There was no set process of doing this. You can imagine though, that some of the same things mattered to those giving the credit or loan. Things like whether or not a person was risky, or sometimes just knowing a person was enough. If a person had shown themselves to be good on their word in the past, and had say a steady income, they were probably more likely to get a "line of credit." There was no "scientific" process applied though.

The down side was that a lot of people could potentially be affected, say if a crop failed, or if people just up and moved away. A whole community could be affected very negatively because the merchant would be out so much money. It had potential for wiping out an economy really as the ripple effects played out. Over time, smart bankers and traders could diversify an economy. Still, it was realized that a lot more people could benefit from an organized way of using credit.

In the 1920's, the United States originated the first credit cards. Individual companies such as oil companies and hotel chains were beginning to issue them to customers. They were issued for company stores in different cities. For Americans that were doing a lot of traveling, this became very helpful. It was a novel idea, for these cards to be accepted in states that were rather distant from each other.

After World War II many veterans returned home and some were able to use credit cards for both business and pleasure. In 1950, the first general all purpose card came about. It was introduced by the Diners Club, Inc. The company charged its card holders an annual fee, and also billed them for the charges either monthly or yearly. The American Express company was the other to establish a major credit card in 1958.

Some of the earlier cards were made of a type of cardboard. Merchants would take the card and write the information down, like name and account information. It was in the 1950's when they were first made of plastic and had the raised numbers which made them perfect for use with those older carbon copy machines. The information was printed on carbon sales slips.

The Bank of America in California started the first national bank card plan in 1959. This system was licensed in other states as well starting in 1966 and was renamed Visa in 1976.

Then Master Charge followed, as did others. Master Charge changed over to the name MasterCard. In an effort to offer more services (like meals and lodging for example), many smaller banks joined forces and made relationships with larger national or international banks.

In the 1970's, the magnetic strips came into play. These strips were put on the backs of the credit cards which contained any possible relevant information. This made it possible for a computer to track the use of the card. In the 1990's the experimentation of computer chips embedded into cards began. As we see today, it is the magnetic strip that still is the key component to this kind of modern merchant commerce. Its hard now, to imagine a time without credit cards, they are so easy to get and so prevalent. The main key now is to not get into debt, or to get out of debt once in it. It has become all to easy to overspend. Good balance and paying off often is the key to success.