Who Issued the First Credit Card in the United States?
Unravel the nuanced history of the first credit card in the United States, tracing its evolution from early concepts to modern payment systems.
The concept of credit, allowing individuals to acquire goods or services with a promise of future payment, has a long and varied history. Before the advent of modern credit cards, various systems facilitated deferred payments, adapting to the evolving needs of consumers and businesses. The term “credit card” itself has evolved, leading to different interpretations of what constitutes the “first” depending on whether one considers a charge card or a revolving credit card.
Early Forms of Credit in the US
Before the familiar plastic card, credit in the United States involved informal arrangements and specialized systems. Local shopkeepers commonly allowed customers to run “tabs,” deferring payment for groceries or other necessities until a later date. Installment credit also emerged, enabling consumers to purchase larger items like furniture or farm equipment by making a series of payments over time.
A more formalized precursor was the “Charga-Plate,” developed in 1928. These small metal plates, embossed with a customer’s name and address, were issued by individual department stores or groups of associated merchants. Salesclerks would place the plate into an imprinter to transfer the customer’s details onto a sales slip. However, these systems were typically single-merchant or limited to a small network of businesses, requiring customers to carry multiple plates for different stores. In 1946, John C. Biggins introduced the “Charg-It” system through Flatbush National Bank, representing an early bank-issued charge card, though its acceptance was limited to a two-block radius around the bank.
The Diners Club Card
The first general-purpose multi-merchant charge card, the Diners Club card, was introduced in 1950 by Frank McNamara and Ralph Schneider. The idea originated when McNamara forgot his wallet while dining, leading him to seek a solution. On February 8, 1950, he returned to the restaurant and paid with a prototype of the Diners Club card, marking its official debut.
The Diners Club card operated as a charge card, meaning cardholders were required to pay their full balance at the end of each billing cycle. It gained acceptance across multiple participating establishments. The company charged participating merchants a fee, and cardholders paid an annual fee. Within its first year, Diners Club expanded to approximately 20,000 members by the end of 1950. This model pioneered the concept of a third-party intermediary facilitating transactions across a broad network of merchants.
The BankAmericard
The landscape of consumer credit underwent a significant transformation with the introduction of the BankAmericard by Bank of America in 1958. This card represented a significant innovation as the first modern revolving credit card, allowing cardholders to carry a balance month-to-month and incur interest on the outstanding amount, rather than requiring full payment. This feature changed how consumers managed their debt and made purchases.
Bank of America launched the BankAmericard through an unsolicited mass mailing campaign known as the “Fresno Drop” on September 18, 1958. Approximately 60,000 plastic credit cards, pre-approved with credit limits typically ranging from $300 to $500, were sent to residents in Fresno, California, without prior application. Merchants in the area had agreed to accept the new card before the mailing.
Despite initial challenges, which led to significant losses for the bank in the program’s early stages, Bank of America persevered. The practice of mailing unsolicited credit cards was later outlawed, but the BankAmericard program eventually became profitable within three years. This innovative model ultimately evolved into Visa in 1976.