With the economy and banking industry in its current condition, it is a good time to look at the history of the credit card. Credit card debt has become a ubiquitous part of American life but the credit card as we know it is a recent development. In fact, credit cards didn’t get their start in the United States until just before World War I. Department stores started issuing metal plates resembling dog-tags to their best customers. By the mid-1920s gas stations began offering credit cards which could be used at their locations around the country. This was an important step because the automobile became common and the mobile lifestyle of the average American has led to the popularity of the credit card.

World War II brought the rationing of gasoline and tires so traveling and automobile use were severely cut back. In 1950, Francis McNamara operated a loan company in New York City. He met a man who would loan out department store cards to friends for a fee and then borrow money from McNamara’s loan company to pay off the balances. He made money on the difference between his interest rate and what he charged his friends for their use. Of course someone failed to pay what they owed and McNamara was saddled with the losses. McNamara was having lunch with his lawyers discussing what to do about the loss when he had the notion of a credit card that could be used at different merchant locations. He decided to start with restaurants in New York City and the Diner’s Club was born.

The initial card was made of cardboard and was issued to an individual with their name on one side and the list of 28 New York restaurants that would accept the card printed on the back. The fee for belonging to Diner’s Club was five dollars per year. He and his attorney successfully enlisted restaurants and more members so Diner’s Club became the first national credit card that wasn’t just for oil and gas. But in 1951, New York’s Franklin National Bank offered a credit card that was accepted by a wide variety of merchants and this made other banks realize what a profitable venture it could be. Bank of America launched the BankAmericard which became the Visa credit card known around the world.

American Express began offering credit cards in 1958 and by the 1960s banks all over the U.S. would mail cards out to anyone that had an address regardless of their credit rating. This led to the explosive use of credit cards in American society and the inevitable bankruptcies and fraud we know all too well. Many laws have been passed to protect the consumer but nothing can protect people from their own bad choices.

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