The History of Credit Cards

Credit-like transactions aren’t new – in fact, they’re quite ancient! The Code of Hammurabi, a set of laws named after the ruler of Babylon from 1792 to 1750 B.C., describes an early system of rules for loaning and paying back money, as well as how interest could be charged. In the 1880s, transactions between consumers and merchants sometimes operated on credit coins or papers. But the real story of the credit card begins in 1914, when Western Union gave metal plates to some customers, allowing them to defer payment to a later point in time. Then came a metal card called the Charga-Plate, which was small enough to fit in wallets and was personalized with the owner’s information; these cards were issued by large stores for use within their store networks. The first bank card system was introduced in 1946 by John Biggins; it was called Charg-It. In 1950, the first Diners Club Card was released. This cardboard charge card was for intended for consumers who wanted to pay back travel or entertainment purchases at a later date. Notably, it was the first card to be accepted by multiple merchants in multiple geographic locations. Following the success of the Diners Club Card, banks and other financial players followed suit. American Express opened their own credit program in 1958 became the first to introduce a plastic card in 1959. Also in 1958, Bank of America introduced the first general-purpose credit card, BankAmericard. Master Charge (later renamed MasterCard) and Discover soon followed suit with their own offerings. The magnetic stripe we are used to seeing on credit cards today was created by IBM engineer Forrest Parry for CIA identity cards; in the early 1960s, it was added to credit cards, making the transactions more digital than physical for the first time. The magnetic stripe remained the standard for many years and is still in use today. However, in 2015, the United States adopted EMV payment technology to help combat credit card fraud. EMV technology uses an encrypted smart chip to hold account data and complete payments rather than the less-secure magnetic strip. Today, most credit cards have both a magnetic stripe and a chip.