When was Credit Card Invented- A Complete History!

Credit cards, for better or worse, are a cornerstone of the United States' economic infrastructure. According to Experian's State of the Credit report, the average American had 3.1 credit cards with an average amount of $6,354 at the end of 2017, plus 2.5 retail credit cards with an extra balance of $1,841 at the end of 2017. But when did credit cards first appear on the scene?

According to the Federal Reserve, "paying with plastic" has become so prevalent that the total amount of credit card debt in the United States surpassed $1 trillion last year. Has the thought of how we arrived at this point ever occurred to you, though? The most astounding thing about credit cards is how rapidly they've become indispensable to modern capitalism, which is quite remarkable.

In most historical accounts, the contemporary credit card can be traced back to the formation of Diners Club in 1950, which was the first charge card that could be used to make purchases at a variety of merchants. In a way, Diners Club was a modern take on an ancient ritual. So, in this article, let’s have a brief look at when credit cards were invented (history)!

Early Forms of Credit

Vendors have been providing credit to their consumers for thousands of years to assist them in financing goods. For example, seeds might be sold to farmers with payment conditions that allow them to be paid when the crop is completed.

the code-named for Babylon's ruler Hammurabi (1792-1750 B.C. ), in what is now Iraq, is one of the first known documented credit systems. These laws set standards for lending money and repaying it, as well as for charging interest on loans and repayments. The term "loan" refers to a financial relationship between a single borrower and a single creditor or merchant that has existed historically. 

Nowadays, a consumer may be able to use revolving credit with a single retailer, which is a line of credit that can be borrowed indefinitely without requiring repayment. In terms of functionality, this is the equivalent of a shop credit card that is not linked to a broader payment network.

The Combination of the Terms "Credit" and "Card"

Companies expanded on the concept of revolving credit in the late nineteenth and early twentieth centuries to add a tangible item that could be used to quickly identify their client accounts. One type of reward was coins or medals that had the merchant's name and logo, as well the customer's account number, on the reverse side.

The shopkeeper would imprint the coin or medal on the customer's sales slip just like many credit card transactions in the late twentieth century. In the 1930s, these coins and medals were transformed into rectangular metal cards known as Charga-Plates, which resembled a cross between a credit card and a military dog tag in appearance.

The Final Countdown

Consumers were already carrying rectangular metal cards that they could use to make purchases, thus there were only a few concerns that needed to be addressed before the contemporary payment card could be developed.

First and foremost, someone had to come up with a financial instrument that could be utilized to charge several merchants at the same time. The Air Travel Card, which was introduced in the 1940s and 1950s and allowed travelers to purchase tickets on credit from a variety of different airlines, was an early version.

Diners Club was formed in 1950 by Ralph Schneider and Frank McNamara, who were responsible for the invention of the modern payment card. This was the first general-purpose charge card, but clients were expected to pay the whole balance on their monthly account each month.

Customer balances on credit cards were first offered by American Express, and then by other companies in the following years. This was the final piece of innovation necessary to establish the financial instrument that we would come to know and recognize as a contemporary credit card.

Credit Card Technology Has Advanced Over Time!

Initially, credit cards functioned in the same way as medals, coins, and plates had previously. A simple imprint of the card would be created by the merchant, which would be recognizable to anybody who recalls how many credit card purchases were made up until the early 1990s. Nevertheless, during the 1980s, many credit cards began to have a magnetic stripe on the back, which could be read by sophisticated computer equipment that was at the time considered state-of-the-art.

A magnetic stripe is considered primitive by today's standards because the information stored on it is not even encrypted, as is the case with most other types of storage media. Just as imprinting gave way to magnetic stripe scanners, credit cards with integrated computer chips are also displacing magnetic stripes as a form of identification. They are referred to as EMV smart chips, and they are embedded computer chips that enable encrypted, two-way authentication between a merchant's credit card terminal and the payment processing network.

This technology has been around since the 1990s, and it has become increasingly popular in Europe over the previous 20 years. American consumers have just recently begun to switch to EMV-enabled cards and readers, with the transition occurring in the last five years. When compared to ordinary magnetic stripes, encrypted communications make it significantly less vulnerable to hackers, and the computer chips make it far more difficult for thieves to counterfeit.

Some industry analysts, on the other hand, believe that the period of EMV smart chips may be relatively brief, given the fast integration of wireless payment technology into smartphones, watches, and other wearable platforms in recent years. Finally, many people envision a day when biometric authentication would allow customers to charge purchases using a fingerprint or retinal scan, rather than needing to carry about a physical device with their credit card information.

Charges were formerly made with metal coins, but we've gone a long way since then, and the credit and debit cards in your wallet may become outdated in the not too distant future.

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