The Credit Card- 70 Years of Service

Credit - and the credit card association - has become the cornerstone of American life. Each U.S. household is estimated that between them at least 10 credit cards, not counting credit cards or cards from home, and takes an average of $ 13,000 in credit card debt. This is not a recent phenomenon.

It was inevitable that the Americans invented the credit card. Americans have always been comfortable about using credit. The Europeans began to colonize America in the 1600s came from countries that had put aside old prejudices about borrowing and lending, and new attitudes toward credit were transplanted on American soil.

Americans have also always needed credit: loans to buy land to establish a business, travel west in search of valuable animal skins or in search of precious metals. Others went into debt in order to reach the United States in the first place - as officials of the colonies under contract did - or run into debt, and were released by the Royal Decree to join English general James Oglethorpe in establishing of the colony of Georgia.

In 1800 the United States was an independent nation with a debt to be a way of life for many of its citizens. New York, the city of pawn loans made from 149,000 separate pieces of the assets in 1828 - compared with a population of about 200,000. In rural areas, people bought horses, wagons, plows, seeds, watches and home furnishings on credit. Many agreed to pay in full at the time of harvest, while others are based on open book credit.

Open book credit was used to cover economic necessities of life such as food and clothing. A dealer allowed customers to take home the products they needed, and pay what they could afford, paying, in some but not all of your balance each month - like many owners of credit cards today day. However, very few fell drowning in debt. Both credit card debt and credit open books are categorized as revolving credit.

The early 19th century merchants also offered a type not revolving credit, the payment plan. These plans are limited to well-to-customers who have purchased items like a piano or a carpet. By the turn of the century, installment buying is no longer limited to the rich, and even working class families could buy "discretionary" goods in installments. He came so that installment buying was associated with the needy. A further refinement in payment plans came in early 20 century with the introduction of the card from the department store's home or credit card.

The credit card was offered for the first time, as well as payment plans had been buyers of luxury items. Market to stores where the card from the house to its valued customers, which of course made them very happy. The card of the house was convenient not having to carry large amounts of cash or suffer the inconvenience of identification if paid by check. The client simply presents the house card to an employee for recording the sale and received a bill once a month for the value of thirty days of purchase. The client settled the bill in full each month. The store will charge for the service, but won the loyalty. This credit card provided to the store to track sales, but the biggest advantage is that the credit card sales per customer increased.

Credit history was a big change with a new development: growth of car sales.

Cars were necessary, but expensive to buy a single purchase. Everyone needs a car, and everyone was forced to buy cars on credit. The car hire purchase gave respectability to credit purchases.

The other meaning of cars on credit was that it allowed people to travel long distances quickly to places where they were complete strangers. What if the car broke down? That was common in early cars. Drivers could end up far from home, in need of costly repairs, and without enough money to pay for them.

To resolve this problem, the oil companies came out with its own type of credit card. This credit card could be used to buy oil, gas and mechanical services. Unlike the credit card department store card or a home, the oil company credit card could be used throughout the country.

Thus, the 1920 essential elements of modern credit card was at hand:

showed oil companies or credit card could be used across the country

or car buying needs showed the purchase at the time was respectable

U.S. or had been comfortable with the credit for centuries.

It took another thirty years before the credit card as we know it was invented. Three men finally achieved this lunch at a restaurant in New York City in 1949.

They were convinced there was money involved in consumer credit, and tried to find a way to tap it. The credit card or card from home sales and increased customer loyalty, but without interest, charge accounts by themselves do not generate revenue. Installment sales are yielding interest, but was intended to cover the costs of the seller, not for revenue.

Suppose the three he wondered, that a third party inserted between buyers and sellers. Suppose that this third party vendors promised many customers, who have not gone to something else. Suppose that the same party that offers wealthy people with good credit records a wide selection of stores (not just a department store or a chain of service stations), where you can charge what they bought, no questions asked. These wealthy do not spend more inclined to visit these establishments had credit? No business owners, seeing their increased sales and profits soar, be willing to return a small percentage of third parties who helped provide the new customer base? No small percentages add up to a small fortune?

Probed the owner of the restaurant, asking how much credit card business that was worth the effort. The owner replied, "The seven percent." And, Diners Club was in the business.

The principles of Diners Club credit card looking miniature books. The owner's name was on the front of credit card brochure, inside which were the names of the establishments had agreed to accept the credit card. The owners do not pay interest or annual fees, but paid their credit card bill every month.

In 1951, Diners Club International has again shown its first profit and credit card related. Four years later the family credit card plastic credit card replaced the original paper. In 1950, Diners Club had begun charging an annual fee of $ 3 and there was a selection of 300 companies with more than 35,000 credit card holders. In mid 1960, restaurants, hotels, airlines, shops and the like were happy to accept credit card Club Diners. The dream of the founders of a universal credit card used for the purchase of several around the world are doing.

Diners Club had its imitators. In 1958, American Express introduced its own credit card and the Hilton hotel chain introduced Carte Blanch. The three were known as travel and entertainment credit cards, to distinguish them from other credit card, bank card.

Seeing the success Diners Club, banks entered the credit card market during the 1950s, and in 1955 over a hundred banks in the U.S. offering credit cards to their customers. Were slowly making money, but they had the distribution of national credit cards, because the law restricts interstate banking. In 1958, the largest U.S. credit performance of the card belonged to Bank of America, but its BankAmericard could be used only in California.

To extend the usefulness of geographical credit card newly fledged, Bank of America pioneered the national exchange that allows all banks around the country to offer BankAmericard. This credit card association later became Visa.

This step solved the problem of the distribution of credit cards. It also led to major banks in the east to form a rival national network of credit cards, the Interbank Card Association who became Master Charge and later MasterCard. Despite initial resistance from department stores, home and other issuers of cards and charge cards, both credit card associations eventually enrolled in the 1980's. The industry of credit cards had come of age.




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