How Did Credit Cards Work Before Computers?

Credit cards have become an integral part of modern commerce, allowing individuals to make purchases without immediate cash. This widespread convenience, however, is a relatively recent development, significantly shaped by the advent of computer technology. Before the digital age, the operation of credit cards relied entirely on manual processes and physical systems, which were ingenious for their time but starkly different from today’s instantaneous transactions.

Early Forms of Credit and Their Operation

The concept of credit predates modern credit cards, with merchants often extending credit to loyal customers through informal “tabs.” Early in the 20th century, formalized systems emerged, such as charge coins and metal money issued by retailers. A significant innovation was the Charga-Plate, developed in 1928, a metal plate embossed with a customer’s name and address, often kept by the store. This system streamlined the process of recording sales on account, speeding up back-office bookkeeping.

The first general-purpose charge card, Diners Club, launched in 1950, allowed members to pay for meals at participating restaurants. Cardholders paid an annual fee, and merchants paid a percentage of the transaction. These early cards operated on a charge account model, requiring the balance to be paid in full each month. In 1958, Bank of America introduced BankAmericard, which pioneered the concept of revolving credit, allowing customers to carry balances over time.

Manual Transaction Processing

Before computers, credit card transactions at the point of sale were manual. Merchants used devices known as “imprinters,” or “knuckle busters,” small, mechanical machines. The credit card, with its raised, embossed numbers, was placed into a recess on the imprinter. A multi-part paper sales slip, often with carbon paper layers, was then laid over the card.

The merchant would slide a roller across the top of the sales slip, pressing the embossed card details through the carbon paper onto all copies of the slip. This action created an imprint of the cardholder’s name, account number, and the merchant’s information. The transaction amount and date were then manually written onto the slip by the merchant. One copy of the slip was given to the customer, while the merchant retained other copies for their records and for submission to the credit card processor.

Authorization and Settlement Without Digital Networks

After manual imprinting, merchants faced authorization and settlement. For larger purchases, merchants often called a central phone number to obtain approval. The merchant would verbally provide card details and transaction amount, and a bank representative would manually check the customer’s available credit. Some systems used code books for verification or had “floor limits” below which no authorization call was needed.

At the end of each day, merchants gathered physical sales slips. These slips were sent to their acquiring bank. Banks processed these physical slips, and interbank settlement involved manual clearinghouses or the physical exchange of checks between banks to reconcile balances. The reliance on physical movement of paper and manual verification meant that transaction finalization could take days, in stark contrast to today’s instant confirmations.

Billing and Record Keeping

Credit card issuer operations were labor-intensive, particularly in managing customer accounts and generating statements. Once transaction slips were received from acquiring banks, they were manually sorted. Bank employees physically posted each transaction to customer ledgers. This process ensured every purchase was accurately recorded against the correct customer account.

Monthly statements were generated manually. These statements detailed all transactions, calculated interest charges, and determined the minimum payment due. When customers made payments, these payments were also manually processed. Bank personnel physically posted the payment to the customer’s ledger, updating the account balance. This system demanded significant human effort to maintain accurate financial records.