The History of Credit Cards - Part 2

Their company would offer customers the opportunity to have credit facilities at many outlets and using only a single card. The Diners Club company would then bill the customers in their ‘buy now pay later’ scheme.

With such a great idea it was always destined to take off. After all any such service which offers customers more choice and freedom would always gain momentum. However as a commercial venture there was a slight problem for the three businessmen creating the company – where would they make their money? So, to begin with the companies who accepted The Diners card were charged seven percent for each individual transaction with card subscribers paying a three dollar annual fee. Whilst everyone would have preferred a free service, the costs were relatively low and the benefits massive. Stores and service companies would benefit from consumer spending who otherwise would not have been able to offer payment upfront, cardholders would have an easy method of payment without the need for cash.

The initial marketing drive and customer focus for the Diners Club was the travelling salesman and the motivation for the company name. Driving from town to town, these individuals would need to eat a range of establishments across the country and across the states. With many restaurants accepting this method of payment, for the salesman it would remove the need to carry around large amounts of cash and visit multiple banks.

So the first major trial was to encourage businesses to accept the card, then drive salesmen to signup as cardholders.

As professional businessmen the three friends had a range of accquiantences and through networking managed to distribute the cards, obtaining signups for both businesses and cardholders. The first design of the cards was relatively simple, printed on paper and offering the locations accepting the card on the reverse. Whilst facing initial difficulty to start the ball rolling once a small number of companies had got on board it was easier to market the card as having proving results (previously having been an ‘experimental’ type service). By the end of nineteen fifty twenty thousand people were using the Diners Club card.

Having initially thought of the idea McNamara was still unconvinced his idea was more than a passing fad. Within two years the company had overcome its start up costs and brought in a profit which was fairly reasonable for the time. McNamara however decided to sell his stake in the company to his two partners, cashing in on his idea but ultimately not following the venture through to ultimate success.

The Diners card continued to grow through marketing and word of mouth, eventually attracting new competitors to the industry. American Express and Visa were created in 1958 and eventually went on surpass the initial efforts of the Diners card, with all companies growing massively throughout the world to become the commonplace service that credit cards are today.

 

Back to History of Credit Cards Part 1