Who Issued the First Credit Card in the United States?

The modern credit card has reshaped consumer finance, offering convenience for transactions worldwide. Its origins trace back to the mid-20th century, when deferred payment evolved beyond localized systems. Understanding the first credit card issuer in the United States involves examining innovations that transformed fragmented credit into a widely accepted payment method. This journey reveals how a simple idea revolutionized how individuals manage purchases and businesses handle sales.

Identifying the Pioneering Issuer

The first general-purpose charge card in the United States was issued by Diners Club. Founded in 1950 by Frank McNamara and Ralph Schneider, the card emerged from McNamara’s experience of forgetting his wallet during a business dinner. This sparked the idea for a card that could consolidate expenses from various establishments onto a single monthly bill. Initially, the cardboard card was accepted by 27 New York City restaurants for dining and entertainment.

Diners Club functioned as a charge card, requiring cardholders to pay their balance in full each month, without carrying a revolving balance. This model allowed cardholders to dine at multiple venues, sign for meals, and receive one consolidated statement. Merchants paid a fee, typically 5% to 7% of the transaction, to Diners Club for processing payments. By the end of its first year, Diners Club boasted 20,000 members, showing the appeal of this multi-merchant credit.

Precursors to the General Purpose Card

Before Diners Club, various limited forms of credit existed. Department stores and oil companies were early innovators, issuing proprietary charge plates or “courtesy cards” in the early 20th century. These cards allowed customers to make purchases on credit, but their utility was strictly confined to the issuing merchant. For instance, a department store card could only be used at that specific store.

Oil companies, such as Texaco and Standard Oil, also offered charge cards in the 1930s, enabling motorists to pay for fuel and services at their branded stations. These systems laid groundwork for deferred payments and customer loyalty but lacked the interoperability of later general-purpose cards. Customers were billed monthly and expected to pay the full amount. While these precursors established the concept of using a card for credit, their single-merchant limitation showed the need for a more versatile payment solution.

The Emergence of Bank-Issued Credit

Following the success of charge cards like Diners Club, financial institutions explored their own credit offerings, leading to bank-issued credit cards. A significant development was the launch of BankAmericard by Bank of America in 1958. This card departed from the charge card model by introducing revolving credit, allowing cardholders to carry a balance month to month and incur interest on the unpaid amount.

BankAmericard was initially rolled out in Fresno, California, where Bank of America mailed 60,000 unsolicited cards to residents, a practice later discontinued due to fraud. The concept quickly gained traction, and other banks sought to offer similar products. In 1966, a group of banks formed the Interbank Card Association (ICA) to compete with BankAmericard, which rebranded as Master Charge in 1969 and then MasterCard in 1979. These bank-issued cards broadened acceptance through their extensive networks, laying the foundation for the widespread credit card system.