Give Me Some Credit: The History of Modern Credit Cards (1 of 3)

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Credit and credit cards have become a part of everyday life for most Americans. Odds are you have one in your wallet right now. We use them for daily purchases as well as big ticket items without thinking twice. But be careful, think about it too little and you can wind up with “bad credit” which can make it difficult to get a loan, or purchase a home, or vehicle.

So what is credit anyway? If you’re in need of a bad credit loan, our look at the history of credit cards may be of great interest to you.

The origin of credit

The concept of exchanging goods using credit has been around since at least the late 1800s. In those days, people would use what was referred to as “credit coins” and “charge plates” as forms of credit. In the early 1900s, companies began offering self-issued cards for purchases only made at their establishments in an effort to increase customer loyalty.

1946 saw the release of the first bank card, referred to as “Charg-It”, created by banker John Biggins. When you made a purchase using a Charg-It card, the bank would foot the bill and then obtain payment from you afterwards. The catch was that it only worked for local purchases, and you had to have an account with Biggins Bank.[1] The type of credit card we use today didn’t come around until a few years later.

Modern credit cards

There are several different versions of the story of the invention of modern credit cards. What is certain is that it started with a businessman named Frank McNamara. It’s said that he was having dinner in a New York City restaurant with friends and when the bill came he realized he didn’t have any cash. At this time, cash was the only way to pay. Some sources say he had to call his wife to bring him money, while others say he avoided washing dishes by signing his name and promising the restaurant he would pay them back for his meal. Either way, he decided there was probably a better way.

McNamara went on to create the first American credit card company, the Diner’s Club. He founded the company in 1950. The company focused on allowing restaurant patrons to sign for their meal and pay for it later. When it began, the Diner’s Club had 27 participating restaurants and 200 members.

It wasn’t hard for McNamara to start making money once the club was established. Each member was charged a $3 annual fee for participation, while each restaurant was charged a 7% fee on all purchases. Needless to say, the cards became very popular with diners, and McNamara saw membership reach 20,000 in the first year. In its second year, the Diner’s Club made about $60,000 and began expanding to Canada, France, and Cuba.[2] It’s really no surprise that people enjoyed having the freedom to make purchases without being charged right away.

In 1958, American Express threw its hat into the ring by issuing the first plastic credit card (prior to this they were made of cardboard or celluloid) exclusively for travel and entertainment purposes. In 1959, consumers saw the introduction of the revolving balance. This meant cardholders were no longer required to pay their bill in full at the end of each month. It gave consumers more flexibility, but also made it easier to end up in debt, much like the system we have today.[1]

All of this led to the creation of the general purpose credit card which did not carry the limitations of only covering restaurant or entertainment purchases. American Express, Cart Blanche, and Bank of America all issued these types of cards. Bank of America then released the first nationally franchised card known as the BankAmericard, which would later become Visa.

From that point, credit card use continued to grow. Over 75% of Americans today have at least one credit card, and as of 2012 credit card purchases in the US totaled 26.2 billion dollars.[2] While it might make life easier in certain situations, there’s also much to be wary of in the world of credit cards. To learn more about the risks and rewards of credit card use, how to improve bad credit, and secure bad credit loans, check out the other parts in our Give Me Some Credit series:


  1. Gerson, Emily Starbuck & Woolsey, Ben “The History of Credit Cards” Accessed July 21, 2016.
  2. Schmalbruch, Sarah “The credit card was invented by a man who forgot his wallet at dinner” March 2, 2015. Accessed July 21, 2016.


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