In a NutshellThe modern-day credit card started taking shape in the 1950s when the first Diners Club cards were issued. Over the next few years, financial products evolved into what we know as today’s credit card.
Credit cards are a useful tool that many people use today, but they didn’t always exist.
When was the credit card invented? While it may seem like credit cards have been around forever, they didn’t exist a century ago. The first credit-card-like payment method showed up in 1950 when Ralph Schneider and Frank McNamara founded Diners Club and issued its first cards. But this wasn’t truly a credit card. Instead, it was a charge card that required the cardholder to pay the entire balance off each month.
Over the years, credit cards have evolved. True credit cards with revolving credit lines were invented. Magnetic strips were added, then EMV chips. Here’s more about the history of the credit card.
A chronology of the credit card
Here’s a quick timeline of the history of credit cards.
- 1950: Diners Club issues the first charge card
- 1958: Bank of America issues the first general-purpose credit card that offered a “revolving credit” feature
- 1958: American Express Company issues a travel and entertainment payment card
- 1969: Magnetic strip standard is adopted in the U.S.
- 1976: Bank of America spins off BankAmericard and joins with other banks to create Visa
- 1979: Mastercard brand comes into existence, formerly the Interbank Card Association and Master Charge
- 1986: As a subsidiary of Sears, Dean Witter Financial Services Group launches the Discover Card
- 2015: EMV chips become standard to help protect buyers against fraudulent card transactions
The history of credit cards
After Diners Club issued its first charge card in 1950, the payment card began evolving into what we know as the credit card today. In 1958, American Express Company jumped into the payment card scene and launched its first charge card.
In 1958, Bank of America launched BankAmericard. This paper card could be considered the first modern credit card. The BankAmericard came with a $300 limit and was the first credit card to offer revolving credit, which gave people the ability to carry a balance. In 1970, BankAmericard was spun off into National BankAmericard, Incorporated, an interbank card association that issued and managed credit cards. In 1976, National BankAmericard, Inc. became Visa.
In 1979, Mastercard was formed. Before it was called Mastercard, the company was formed as The Interbank Card Association in 1967. It then rebranded itself as Master Charge in 1968 before its final change in 1979.
And finally, we have the Discover Card, which was launched nationally in 1986 by Dean Witter Financial Services Group, Inc. which was a subsidiary of Sears.
Credit cards didn’t always have magnetic strips or EMV chips. Before magnetic strips, machines would take imprints of credit cards to capture the information needed to process payments. The copy would be sent to a processing center where a clerk could enter a person’s credit card account information into a computing system.
In 1969, IBM helped develop a standard for magnetic strips that would eventually be adopted internationally. This standard allowed credit cards to use magnetic strips to transmit card information worldwide.
Until recently, magnetic strips were the most common way of storing and transmitting card information. A new technology, called the EMV chip, aimed to make credit card transactions more secure. These chips generate unique, one-time codes to approve transactions and are considered more secure than static magnetic strip information.
Credit card legislation
Congress has passed many laws relating to credit cards. Each law aims to protect consumers. Here are some of the major laws that have affected the credit card industry.
- Truth In Lending Act (1968)
- Fair Credit Billing Act (1974)
- Fair Debt Collection Practices Act (1977)
- Credit Card Accountability Responsibility and Disclosure Act of 2009
Learn more about these acts by reading the linked articles above.
If you’re ever asked when the credit card was invented at trivia night, now you have the answer.
With this new knowledge of the history of credit cards, you might want to take a look at how you’re using your cards.
The first payment cards required you to pay your statement balance in full. If you use this strategy of paying your cards off in full and on time with your current credit cards, you may be able to avoid paying interest and falling into credit card debt. Once you’re successfully paying your balance off in full every month, consider finding a rewards or cash back credit card that can give you the most value for each dollar you spend.