The History of the Credit Card | Thinking Money | Free Financial Advice and Tips

History of the Credit Card

Posted on 06. Mar, 2009 in Credit cards

Credit is something that has been around for a long time, so it is really not surprising that the credit card is merely an extension of the idea. Because the idea of credit resulted from a need to pay later, or because not enough gold or silver was on hand, credit is the natural result.

Credits’ Long History

There are records available that show that credit was used somewhat regularly as far back as the days of Egypt and Babylon. Later on, in 1730, a furniture salesman by the name of Larry Thornton advertised furniture that could be bought on credit and paid for a little at a time.

The First Credit Card

From that time up until 1951, there were various systems of credit in place, set up by merchants, oil companies, and lenders. In that year, the first actual cardboard credit card was introduced – called the Diner’s Card. This credit card was issued in New York City and only its owners could charge meals eaten at 21 different restaurants in the area.

Apparently, the credit card idea was started by a man who had hosted a party at a restaurant in New York City and had forgotten his wallet – and had no other way to pay. The first one was actually a charge card and the entire bill was expected to be paid when the bill was received.

Invention Of Plastic Credit Cards

About another decade later, the cardboard charge card was switched to the more durable plastic when American Express issued its credit card. The magnetic stripe was added around 1961, after it was standardized. American Express quickly expanded its credit card internationally and claimed over 1 million users of their credit card within the first five years.

Since that time, credit card use has rapidly gained users, until now there are about 2.4 cards per user in the United Kingdom, which is now only second to that of the United States. That country now has 5.1 cards per consumer, according to Wikipedia.

Different Types of Credit Cards

Today, there are many different types of credit cards available, and each one will meet different people’s needs. A credit card always has a limit on how much credit is extended, which is usually based on the person’s repayment ability and credit rating. Here are some of the more common types:

Credit Cards Rewards - Provides a percentage of your expenditures back to you – either in the form of a check, credit, or gifts. Generally this will range between 1 and 5% of your purchases.
Charge Cards - This card allow you to charge it, but expect the bill to be paid in full when you receive it. Generally have no frills.
Debit Card – Enables you to use the card as cash, but is limited to the amount of cash you have in the bank account. Debit cards can be used to restore credit if it is not in good shape.

Use of Different Credit Card Types

The United States is the largest user of the credit card, but other nations have largely adopted other forms. For instance, England uses many more debit cards than credit cards, and so does the rest of Europe, too. While credit card use is expanding throughout the world, it seems that countries with more conservative spending habits have chosen more conservative cards that extend little credit – if any.

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