The story of the credit card is one of the most important success stories in world history. While today’s consumer-driven economy has led to what some may call an over-abundance of credit card usage, the invention of the credit card stems all the way back to the nineteenth century. The concept of a credit card was first espoused by Edward Bellamy in 1887, in his utopian novel “Looking Backward” and its sequel “Equality”. This idea rapidly developed into a tangible phenomenon: in 1914, Western Union began issuing its most regular customers with charge cards, and the industry grew even further during the American boom economy of the 1920s, for the specific purposes of selling more fuel to car owners. In 1938, companies began to accept each others credit cards, expanding the industry even further.
In 1950, Ralph Schneider and Frank X. McNamara began using the credit card to pay merchants, in order to consolidate multiple purchases. Originally founded as simply Diners Club, their company is now known as Diners Club International and was the first independent credit card company in the world, closely followed by American Express. In 1958, the Bank of America created the “BankAmericard”, a product which eventually became, together with “Chargex”, the modern Visa card. Mastercard was first issued in 1966, when a small group of credit-issuing banks established “MasterCharge”. 1966 also marked the advent of the credit card in Britain, and APACS, the UK Payments Association, has recently issued a guide celebrating the 40th anniversary of the credit card.
It is important to note the differing trends in the take-up of credit cards around the world. In the US, the highly consumer driven economy of the early twentieth century meant that the use of charge cards quickly became common practice, and they were soon to be an institutional part of everyday life. In Britain though, while the take-up of the credit card was in general slower, the same pattern has emerged. APACS estimates that there are currently 31.6 million credit cardholders in the UK; that’s an average of 2.4 credit cards per person, with major credit card companies like Barclaycard credit cards continuing to bring out newer, more flexible offers for customers. Indeed, the abundance of credit card companies in the market has inspired a whole set of credit comparison sites, such as Moneynet’s credit card comparisons, so consumers can make more informed decisions on which credit cards to use.
Yet in many European countries, such as Germany, France and Switzerland, the take-up of credit cards has historically been much slower. It was only in the 1990s that credit card usage statistics reached anywhere near the levels achieved in the USA, Canada or Britain. In many of these countries, the acceptance of credit cards is still strongly tied to the perception of the banking system, whether or not they are generally trusted. But in a strange change of trend, new chip-based credit cards were introduced much faster in places like France, partly due to the nature of the legislative framework surrounding banking system overdrafts. These chip-based cards are now seen to be important devices to guard against fraud, and will prove crucial in the future development of the credit card worldwide.