In its short history, the credit card has made quite an impact on the way we do business, as well as on how we take on and view debt. Although the concept of credit and charge accounts has a 2,000 year history, credit cards, as we know them today, had their start in the boom era that preceded the Great Crash of 1929. The expansion of usage that the credit card has enjoyed through the years could be thought of as reflecting a general shift in attitudes concerning money and debt.
Economic conditions in the United States underwent significant change during the period of time before the arrival of the first type of credit card, called shoppers plates, to hit the American retail scene. The second wave of the Industrial Revolution led to the rise of the factory in America and the decline in the percentage of people engaged primarily in agrarian work. The wealth created by the shift in economic focus brought about by the Industrial Revolution ushered in the Gilded Age. The wealth enjoyed by the capitalists and investors able to make the most of the new opportunities of the era eventually trickled down into the broader prosperity found throughout society during the Roaring Twenties.
Much of this broader prosperity had to do with the broad range of consumer goods that became affordably available on a much wider scale because of the effects of the Industrial Revolution on the production of goods and on the culture as a whole. The ability and desire to consume conspicuously became democratized. Thus, it is not surprising at all that the earliest form of what we would recognize today as a credit card came into being during this era.
The shopper’s plate, as it was called, was typically a metal, store specific charge card. Unlike a credit card, the expectation with the use of a charge card is that the bill would be paid at the end of the month. The earliest charge cards appeared in the early 1900’s, but were quite limited. It was during the 1920’s that the charge card became used on a much wider basis and began to move closer towards what we would understand as a credit card, although the terms are often used interchangeably today.
One of the ways in which the charge card of the 1920’s began to function the way a modern credit card does, came about as a direct result of the growing automobile industries. Fuel stations offered cards that could be used throughout the nation, but in charge card fashion, these bills were expected to be paid in full monthly.
By the 1930’s, a few retailers started to edge towards using what has been referred to as revolving credit, which allows card-holders to pay back their balances over a period of time while simultaneously charging new amounts up to credit limit, a feature that distinguishes charge cards from credit cards and the common credit of yesteryear from the retail credit arrangements typical of today. The first step towards revolving credit was taken by a major department store extending the repayment period to four months, though it did refuse to allow further credit purchases to be made until the prior bill was paid in full. True revolving credit didn’t appear until the 1940’s, when it was offered by a few department stores via their store cards.
This progression demonstrates a changing attitude towards debt, as well. As the economy became more driven by consumption, it became more culturally accepted to go into debt for things that were wanted, rather than limiting debt to things that were essential and saving up money to purchase luxury or nonessential items. This trend towards materialism and instant gratification was a cause of concern for many traditionalists, and the era saw public movements against this cultural shift, such as thrift movements and national thrift week.
However, curbing consumption in a industrialized economy that was producing and mass marketing more goods than ever before simply was not workable, and the changing attitudes towards credit and consumption prevailed, as evidenced by the arrival of the modern credit card during the 1950’s. The very first credit card in America, as we use the phrase today, is attributed to the Diners Club, and was first issued in 1951. Credit cards backed by banks, with such modern features as annual fees, interest rates, etc., soon followed. 1966 brought the first national bank backed credit card, which – after a name change in 1976 – is now the Visa we know today. Master Card also has its roots in that era, taking on its now familiar name in 1980.
The loosening of regulations in the past couple of decades has made credit cards more easily available than they were before. People who, in earlier times, would not have been eligible for credit cards, found themselves with a variety of credit card offers. This has contributed to previously unmatched levels of credit card debt today. The rate of personal savings has reached negative numbers, with a greater number of people spending more than they earn to a degree that hasn’t been seen since the Great Depression.
The history of the credit card appears to be tightly entwined with fundamental changes in our economy, such as the shift from an agrarian economy to one based upon the consumer consumption made possible by the second wave of the Industrial Revolution, as well as the changes in the way that people view debt and money. There are many conveniences to be appreciated in our modern credit card, and it has certainly left its mark on the way we do business and live our lives today.
Picture of the Diner’s Club Card
The Diners’ Club card all began with a change of clothing and a forgotten wallet. Frank McNamara had an important business meeting in 1949 at Majora’s Cabin Grill. Before going to his meeting he changed his suit, however, in his rush he had forgotten most of his money in his other suit. He did handle the situation, but it got hits brain to thinking and with his business partner Ralph Schneider, the very first Diners Club Card was introduced. Frank and his associate dined at the same restaurant except when it was time to pay, Frank handed over the cardboard card and signed for his purchase. Throughout history, this dinner has been known as the First Supper.
Other historical perspectives: History of Credit | History of Formal Lending | Women and Credit