a brief history of credit cards
Credit cards have nowadays i inuated themselves into all corners of our lives, and it is rare for an adult these days to not carry at least one card. As well as being used in the traditional ma er to buy goods or services in person, they are also now used online, over the telephone, for writing checks, and even for withdrawing money from cash machines. People use them in all sorts of ways - as a mea of borrowing, as a convenient payment method, and even for earning money through cashback or reward schemes.
De ite their ubiquity in modern life, credit cards have a fairly short history, with the first general purpose credit card being introduced le than fifty years ago. In this article we’ll look at the origi of credit cards, and then at how they’ve developed over the years with the emphasis on the United Kingdom market.
The very first credit card was launched by Diners Club in 1951, and was limited to use in twenty seven New York restaurants. It wa ‘t a huge succe initially, with only 200 cards being i ued. The real story of credit cards began in 1958 with the introduction of two major new products. The first was the American Expre charge card, which boasted over a million users within five years of it being launched.
The other i ovation was the first example of what we now recognize as a credit card: the Bank Americard, a general purpose card developed by Joseph Williams while working at the Bank of America. Over time, this card was to develop into the Visa company that we know today. Eight years after the introduction of this card, fourteen U.S. banks formed an alliance to launch a rival to the Bank Americard, named Interlink, which was to evolve into the Mastercard payment proce or by 1979.
The first UK general card was launched by Barclays Bank in 1967, and their Barclaycard is still one of the most popular and wide read cards forty years later. In 1972, four other UK banks joined forces to launch the Acce card in competition with Barclays, and for the next decade or so this remained the status quo.
It was during the 1980s that the credit card industry began co olidating behind the two big proce ors that had evolved into their current form by this time, Visa and Mastercard. Banks dro ed their own proce ing facilities, and began to i ue cards that could be used at any outlet that su orted these two main payment proce ors. It was this move that led to the great expa ion in card use, as they could now be easily used almost anywhere in the world.
The next major change to the industry was the revolutionizing technology of the internet, allowing purely online cards such as Egg in the UK to offer attractive benefits to the cardholder at low cost to the i uers. Competition between lenders quickly heated up, and features such as balance tra fer offers began to a ear.
Balance tra fer deals allowed cardholders to move their debt from card to card and avoid paying any interest on it almost indefinitely, or so it seemed. Unfortunately, this ruse of ‘credit card surfing’ couldn’t last as it was costing the credit industry billio every year, and so a balance tra fer fee was imposed which made it much le attractive to cardholders.
The last major change in the credit card industry has been the introduction of Chip and PIN technology which has cut card fraud su tantially by requiring payments to be a roved via entering a code number rather than relying on a signature. The technology began to be rolled out in the UK in 2004, and is now fully in use acro the country.
What’s next for credit cards? Only the i uers know, but with record levels of debt many people are reluctant to a ly for new cards, and so we’re likely to see more attractive features becoming available to new a licants as credit companies compete for the shrinking amount of busine available.
