The History of Credit Cards

In the modern world paying for goods and services with credit cards is simply normal – a common and convieniant occurrence. The credit card is a modern phenomenon and certainly one of the most popular inventions from the twentieth century and continues to gain popularity as more and more consumers sign up.

The initial idea for a card which facilitated purchases began with Frank McNamara in nineteen forty nine. He owned a credit company but was experiencing problems with one customer in particular who had borrowed some money but was unable to pay it back. The man in question had lent some of his charge cards to poor neighbours who had needed to use them in an emergency. The cardholder in question was then unable to meet the bills which had been racked up as the neighbours also could not pay immediately. In order to pay the individual stores for which he held cards the cardholder had then contacted McNamaras credit company to see if they could help. He had met at a local diner with friends to discuss this case (his friends were, convieniantly local store owners).

At the end of dinner McNamara found he had left his wallet at home so was unable to pay cash for the meal.

So to pay he had to call up his wife and ask her to bring his wallet to restaurant right away (for fear of behind arrested – the consequence of not paying his food bill there and then). She duly obliged but this incident caused McNamara much embarrassment and he vowed never to allow this to happen again.

The situation caused him to dream up a quite unique service for the time. He pondered, what if a card facility could be created, allowing the cardholder credit facilities but with one big difference – it could be used at multiple locations, with the card provider acting as a middleman between the customer and the stores. Until that time, anyone requiring credit had to be pre-approved by the store and carry around their individual cards.

The application and provision of credit services had began way before McNamaras’ breakthrough however. Charge accounts were available in the early twentieth century as a banking service, however the theory and general use of credit has been common throughout the ages. In the more modern times, rather than by formal arrangement, those approved for credit at various stores and outlets were given cards to represent their ‘available for credit’ status.

McNamara discussed his idea with the store owners he had lunch with - Bloomingdale and Sneider. These three pooled their money, creating a new company in 1950, calling it The Diners Club.

 

Now to Part 2 of History of Credit Cards