History of Credit Cards the First Issuers

¶ … History of Credit Cards

The first issuers of credit cards were post-World-War I-era merchants whose customers began arriving from more distant locales by the first automobiles that were widely available to ordinary Americans (Stephy, 2009). Originally, they were intended to allow customers to make payments on unplanned purchases without having to return to their homes to retrieve their cash or their checkbooks (Stephy, 2009). In issuing credit cards, department stores and hotels were actually following the practice first introduced in modern times by gasoline service stations; they began issuing credit cards precisely because their products and services were most in demand by consumers who were too far from home to expect them to go back home for their money (Woolsey & Starbuck-Gerson, 2009). Initially, those credit cards were issued by individual gasoline companies and they were only good for those specific chains (Woolsey & Starbuck-Gerson, 2009). Even that practice had much earlier roots, dating the better part of a century to the informal practices between some merchants and their regular customers (or between wholesalers and retailers) to issue one another "credit" for purchases to be paid in full after the transactions (Woolsey & Starbuck-Gerson, 2009).

Several decades later, during the post-World-War-II industrial boom, credit cards became much more common (Stephy, 2009), beginning with the very first bank card issued in 1946 by a Brooklyn, New York banker named John Biggin (Woolsey & Starbuck-Gerson, 2009). Biggin's card was much more restrictive than modern credit cards because it was only available for customers who maintained bank accounts at the issuing bank. Still, in principle, they worked the same way as modern credit card: namely, customers presented their cards to merchants and the banks guaranteed the payment to the merchant and then settled up the account later with the customer (Woolsey & Starbuck-Gerson, 2009). Several years later, in 1950, Diners Club began issuing the first credit card that more closely resembled the credit instrument they eventually became, but they were only usable for dining and for travel and entertainment-service-related expenses (Stephy, 2009; Woolsey & Starbuck-Gerson, 2009).

The modern concept of credit cards that were more widely usable for all sorts of consumer purchases and other expenses and that did not limit eligible users to account holders of the same banking institution was pioneered by American Express, previously a company that had specialized mainly in travelers checks (Stephy, 2009). Within a year, Bank of America also began issuing credit cards as well (Stephy, 2009). By 1959, the original cardboard or celluloid cards were being replaced by plastic because it was more durable and American Express had issued more than 1 million cards, good for use at almost 100,000 different business establishments around the world (Woolsey & Starbuck-Gerson, 2009).