One does not always wonder in everyday matters why they exist and when they were invented. For example, refrigerators and washing machines have saved many everyday lives, but who will think about their history?
The same goes for credit cards. Find out when the first credit card came on the market and how credit card features have evolved over time!
Diners Club was the first credit card
When presenting his credit card, did not talk about interest rates, account management fees or reward points, but his idea was to provide a form of payment that could be used to pay for credit in more than one place. Previously this was not possible.
The card would get you all the expenses on a single bill, without having to carry large amounts of cash with you. In addition, the card would provide an invoice and receipts for all expenses, which would be very useful for many, for example to break down labor costs and make tax deductions.
Although Good Finance called the card a credit card, it was not a credit card but a payment card. The remaining balance on the card therefore had to be paid in full by the end of the month.
Bank of America offered the first Personal Payday credit card
For the first few years, there were no interest or delay charges at the Diners Club, although the full bill was not paid by the end of the month. The company’s source of income was a 7% commission, which it charged merchants for every purchase made at Diners Club.
American Express followed suit shortly after the Diners Club. Good lender released its first card in 1958, which also had to be paid off in one go. The purpose of the cards was to combine invoices from different marketplaces, not to offer a longer payment period.
Diners and Good lender were sued by Bank of American BankAmericard , the first “ Personal Payday credit card ”. This new card allowed consumers to take a short-term loan and pay off their bill with a Personal Payday payment schedule, albeit with interest.
Personal Payday credit cards are now the norm, and the only company that offers payment cards only is American Express. In Finland, Diners Club also offers charge cards, but credit cards are also available.
Credit cards were used to pay for restaurants and travel
As the name of the Diners Club card suggests, the card was initially accepted only in restaurants, which was Good Finance’s original idea. However, the high 7% commission charged to restaurateurs was a barrier to multiple card acceptance.
Restaurants that were able to pay 7% were more expensive and therefore the credit card became the main means of payment for the wealthy. Shortly after the restaurants, the Diners Club expanded to include hotels.
Good lender also paid at several restaurants and hotels. In 1958, the card was approved at up to 17,500 different payment locations. Good lender charged a 6% commission on the stores and a $ 6 annual fee, which was $ 1 more than the Diners Club annual fee.
The current usability of credit cards is global, as almost all credit card issuers, banks, offer credit cards operated by Visa (evolved from BankAmericard) or MasterCard (originally “MasterCharge”).
Visa and Mastercard enter into agreements with merchants on behalf of credit card issuers, the banks. Visa and Mastercard typically charge merchants around 2-3% commission.
Credit card reward programs
Many stores offered reward programs long before credit cards. The Discover credit card, launched by the Sears department store chain in the 1980s, offered a cashback reward program, which returned a small portion of the total purchase amount to the cardholder.
Shortly afterwards, Citi, in partnership with American Airlines, launched a flight credit card, which allowed the cardholder to earn air miles. In the 1990s and 2000s, the number of credit cards offering rewards and points began to grow rapidly around the world.