Credit card usage is getting easier every year. The term “swipe your card” is fast becoming obsolete as we can tap and use digital wallets on our phones instead of physical cards.

Despite many recent advances, the history of credit card evolution technology is much older than you might think. Even in ancient civilizations, humans benefited from credit systems. From clay tablets to metal cards, dive into the history of credit cards.

Ancient History of Credits

Although the credit cards we use today are an American invention, the credit system itself has been around as long as civilized humans. Economic transactions were conducted on what is now considered a line of credit. This credit system existed because the period between planting and harvesting crops was spread out over several months. According to American economist Michael Hudson, our ancestors often accumulated debts while crops were growing and paid them off when it was time to harvest.

The first recorded transaction that laid the foundation for the modern credit card system occurred over 5,000 years ago when ancient civilizations in Mesopotamia used clay tablets to trade with the neighboring Harappan civilization.

Fast forward a few thousand years and you can find more examples of credit card-like systems in the United States in the early 1800s. An up-and-coming Wild West merchant would use his credit his coins and charge his plates to give credit to farmers until the season's crops were harvested.

Charg from metal plate -It Cards

At the beginning of the 20th century, the concept of the modern credit card system was further advanced. In 1918, Western Union began issuing metal plates called “metal money” to a select group of customers.

These metal plates allowed consumers to defer payment for their purchases. The metal plates issued by Western Union were conceptually similar to modern credit cards, but were very limited in comparison to modern credit cards, being used only by a select group of customers for specific transactions. I made it. A few years later, in the 1920s, oil companies and hotels also issued their own forms of credit cards that customers could use at these company locations.

Fast forward about 30 years to 1946, and a new payment method called the “Charg-It card” made these metal plates obsolete. Created by Brooklyn banker John Briggins, the Charg-It card used Begins' bank as an intermediary for transactions. The bank initially paid the merchant for the goods purchased by the consumer, which was then refunded by the Charg-It cardholder. His Charg-It card from Biggins is the first example of a closed-loop credit card.

The Dawn of the Modern Credit Card

The Diners Club Credit Card

The first example of a credit card known today was often credited in 1949 with the Credit to Frank McNamara and his business partner Ralph Schneider, founder of The Diners Club.

Frank McNamara was dining at Major's Cabin Grill restaurant in New York City. When it came time to pay his bill, he realized he left his wallet at home.

Although versions of the story vary, McNamara is said to have escaped from having to wash dishes in the back of the restaurant by signing that he would come to pay the next day.

This incident gave McNamara the idea for the first credit card. Diners Club began with a cardboard card that could be used by select men at his 27 participating restaurants. When the Diners Club was formed, there were 200 of his members who were mostly friends and acquaintances of Schneider and McNamara. Within two years, his 200 initial members had grown to a staggering 42,000 nationally, and Diner's Club became the first credit card user to be used internationally. . This card can be used in the UK, Cuba, Canada and Mexico.

The first bank-issued credit cards

Many credit cards today are issued by major banks such as Chase and Capital. One, and Bank of America. Shortly after the Diners Club card came out, these banks stepped in and offered the first credit cards that allowed users to carry their credit card balances with them each month.

Bank of America was the first bank to throw its name in the ring in 1958, sending out the first bank credit cards to some customers in California. In 1966 they released the famous BankAmericard. Despite high fraud and delinquency rates, the company didn't give up. Simply put, Bank of America, with the help of several other companies, made the Bank America Card the first US credit card to allow revolving debt. Ten years later, BankAmericard separated from Bank of America and became Visa.

In 1966, a group of California banks came together to form the Interbank Card Association (ITC). Together, they released Mastercard, Visa's biggest competitor to this day.Originally called Master Charge, the name was changed in 1979.

Today's plastic Credit card

American Express created the first plastic credit card in 1959, followed soon by Bank of America, Carte Blanche, Diner's Club, and other newly formed credit card companies. The modern magnetic strip was invented in late 1969 when his IBM engineer named Forrest Parry couldn't figure out how to glue a magnetic strip to a plastic card.

Parry took the card home and complained to his wife about the problem, who suggested ironing it onto the card. The iron turned out to be hot enough to melt the magnetic strip into the card, and the invention was soon adopted by credit card companies as a tool of both convenience and security.

EMV and contactless credit cards

According to the FTC, there were over 65,000 credit card fraud reports in 2021 alone. This relentless scam increased credit card security in a number of ways.

EMV (an acronym for Europay, Mastercard and Visa) is a type of credit card that uses a chip and pin instead of a magnetic strip to complete transactions. A chip embedded in a credit card increases card security by generating a unique encryption code each time the card is used in a transaction. EMV cards were widely adopted in the United States in the 2010s, several years after they were widely used in Europe.

Credit Score Invention

Nowadays, credit cards help build credit, but credit scores and credit cards didn't always. Linked. So when was the credit score invented?

Although credit systems have been around since ancient times, our credit scoring system began in 1841 with one of the first credit bureaus, the Mercantile Agency. The company's employees, known as correspondents, gathered information on borrowers and lenders nationwide. Hired trading companies rely on personal impressions of borrowers, leading to discrimination among minority communities.

Today, your credit score is a three-digit number between 300 and 850, representing your financial habits of lending and borrowing, but it took us a while to get to this point. In 1956, Bill Fair and Earl Issac created the first credit scoring system through the Fair Isaac Company, but it didn't catch on quickly. It wasn't until 1989 that the FICO scoring model was released and all stations used a standard formula. Three credit bureaus currently dominate the industry.

Credit Card Law

Credit The card industry grew rapidly from 1951 through the late 1960s, but it was not a perfect system. Early credit card companies were often discriminatory and did not extend credit to African Americans and other people of color. Additionally, a woman could not get a credit card without a male co-signer until 1974.

The pitfalls of the credit card industry didn't just affect women and minorities. Prior to 1970, the United States had little or no regulatory protection for cardholders. This meant no contractual terms, no standard calculation of APR, no protection against predatory debt collection.

This began to change in the 1960s and 1970s, when a series of laws were introduced and passed to protect credit card holders. Groundbreaking laws include the Fair Credit Reporting Act of 1970, which required credit card companies to report fair and accurate information to credit bureaus, and the ban on credit card companies discriminating on the basis of sex or race. It included the Equal Credit Opportunity Act of 1974, which made it illegal to .

Shortly back in 1968, the Truth in Lending (TILA) Act was also passed to protect consumers from improper practices by lenders and creditors. With respect to credit cards, the law prohibits lenders from increasing credit card limits without considering the user's ability to pay the credit line. It also prevents credit card companies from opening accounts on your behalf.

Most recently, in 2009, the Credit Card Accountability and Disclosure Act was passed. Also known as the CARD Act, this law protects consumers by: It made it illegal for credit card companies to change interest rates on existing accounts, and in particular significantly reduced “over-the-limit” fees.

The Future of Credit Cards

From verbal agreements to clay tablets to metal charge plates, credit systems predate the invention of plastic cards in the late 20th century.

Today, the credit card industry is much more regulated and fair than it used to be, but it is still growing and transforming. Physical credit cards are undergoing a transformation, and a new generation of consumers seems to prefer only digital banking options. Virtual credit cards are also gaining popularity as the trend toward digital-only options continues. A virtual card is attached to a physical card but generates a separate number that can be used for online shopping. Although this number looks like a regular credit card number, it's different from a regular card and therefore more secure.

As time goes on, the future of credit cards is uncertain. But if you look back in history, you'll see that in some form or another, credit cards have survived.