| The following is a brief history of the credit
card industry from birth to present. Various references
were used in compiling this information.
Charge cards can be dated back to the early 1900s.
In 1914, what seems purely as a customer service
goodwill gesture, Western Union gave some of their
prominent (preferred) customers a metal card to
be used in deferring payments-interest free-on
services used. One source said this card became
known as "Metal Money."
As time progressed so did the charge card. Up
till the start of WW II, department stores, communication
companies, travel and delivery companies, and
oil companies had extended this service to their
preferred customers. These company based charge
cards were limited by their use exclusively through
the issuing company. These companies issued the
cards, processed the transactions, and collected
the debts from the customer.
In WW II, the use of credit and charge cards
was prohibited.
After WW II, credit cards became more accessible
to the general public After seeing trends indicating
increased travel and spending among those who
held charge cards, banks became interested in
credit cards-after all they were in the business
of lending money, and they saw the profit potential
behind attaching interest to the cards.
When banks first got into the credit card business,
they were only issuing cards to local consumers.
In 1951, the Franklin National Bank in New York,
issued the "Charge It" card. Which allowed
consumers to make charges at local retail establishments.
This charge card system worked much like credit
card systems work today. The consumer made a purchase
using the card; the retailer obtained authorization
from the bank, and closed the sale. The bank would
reimburse the retailer and collect the debt from
the consumer at a later date. Other banks across
the nation were impressed with the success of
this process that within several years after the
"Charge It" card they offered their
customers similar services for making purchases
at local retail establishments.
In the 1950s the first charge card was developed
that allowed consumers to make charges for services
and goods from a variety of retail outlets. This
innovation was the Diner's Club charge card, which
was established for business men to use for travel
and entertainment expenses. The Diner's Club card
gave its members up to 60-days to make payment.
The first "revolving-credit" card was
issued in the State of California by the Bank
of America. The card, BankAmericard, was marketed
all across the state. This card set another milestone
in the development of the credit card industry.
The BankAmericard was the first card to give cardholders
payment options. Payment options like today's
cards, let consumers pay the debt in whole or
they could make monthly minimum payments while
the banks charged interest on the remaining balances.
By the 1960s, bank card associations begun to
emerge. In 1965, Bank of America issued licensing
agreements to other banks-both large and small-across
the nation. These licensing agreements allowed
other banks to issue BankAmericards and to interchange
transactions through issuing banks.
By 1969, most independent bank charge cards had
been converted over to either the BankAmericard
or Master Charge cards.
Eventually, charge card issuing and processing
became too large of a task for the banking industry
to handle. That is what lead to the emergence
of credit card associations such as Interlink
Association, Western States Bank Card Association,
and National BankAmericard Inc. Current associations
include Visa and Master Card.
The next major changes in the credit card industry
involved streamlining transaction processing and
reducing credit card fraud. In the early 1970s,
electronic authorizations allowed the retail establishment
to get approval for credit card transactions 24
hours per day.
By the mid 1970s, the credit card industry started
exploring international waters, but had some difficulty
because of the name association; "America"
in BankAmericard, for instance. This lead to the
renaming of BankAmericard to Visa and Master Charge
followed suit by changing its name to Master Card.
By 1979, electronic processing was improving.
Electronic dial up terminals and magnetic strips
on the back of credit cards allowed retailers
to swipe the customer's credit card through the
dial up terminal, which accessed issuing bank
card holder information. This process gave authorizations
and processed settlement agreements in a mater
of 1-2 minutes. An added benefit was paper reduction.
The early 1980s, gave birth to the first Automatic
Teller Machines (ATMs), which allowed consumers
access to cash, and to make deposits, 24 hours
a day across our nation and in other countries
as well. Credit card holders could access cash
in different currencies.
Since its existence, Visa has been a leader in
credit card innovation. Because of this they have
emerged as the world's leading credit card association
with over 1-billion cards being issued, and carrying
over 50% of all credit card transactions conducted
world wide.
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