The history of credit cards as we know them today began in 1950, when Diners Club launched the first modern credit card. Credit card history also includes a number of important milestones from 1950 to today, including the introduction of magnetic stripe verification in the 1960s and EMV chip technology in 2010.
Unlike early credit cards, which were all “charge cards” that had to be paid in full at the end of the month, most modern credit cards allow people to carry a balance between months. That means the type of credit card in your wallet today has likely been around only for a tiny fraction of all credit card history. Below, you can see an in-depth timeline of the history of credit cards, followed by a discussion of how credit cards developed to their current state.
The concept of buying things on credit has been around since ancient times, and it became more refined in the 19th century, when companies began to use metal coins with their logo and customers’ account numbers emblazoned on them to keep track of transactions made on credit. Then, in the early 20th century, a handful of U.S. department stores and oil companies began issuing their own credit cards – the forbearers to modern store cards – that were only usable at the particular business that issued them.
Those products paved the way for the first true credit cards – the Diners Club charge card in 1950 and the BankAmericard charge card in 1958. Unlike all previous credit products, these cards could be used at multiple merchants. They still were limited compared to credit cards today, though. They were only usable for travel and entertainment purchases, and cardholders had to pay the bill in full each month.
Diners Club Card: Diners Club was launched in 1950 with a $1.5 million investment, and its paper cards were used by roughly 200 friends and family members of founder Frank McNamara and accepted at 27 New York City restaurants. Users were required to pay their full bill at the end of the month in order to continue using them.
By 1951, Diners Club had roughly 42,000 members and had begun charging a $5 annual fee. Diners Club offered its first plastic credit card in 1961 and surpassed 1 million members in the early 60’s. The company was acquired by Citigroup in 1981 and Discover Financial Services in 2008.
BankAmericard: This was the first credit card to offer revolving credit. In September 1958, Bank of America invented credit card mass-mailing, sending 60,000 unsolicited active cards to consumers in the Fresno, California area. The next year, the company expanded to the San Francisco, Sacramento and Los Angeles markets – ultimately dispersing more than two million cards – usable at over 20,000 merchants – across the states.
But while Bank of America expected that roughly 4% of accounts would prove to be delinquent on payment, the actual figure was actually around 22%. That, coupled with public outrage over the fact that cardholders would be held responsible for unauthorized charges, ultimately led to the company losing an estimated $20 million on this initial launch.
BankAmericard persevered, however, expanding nationally through a series of licensing agreements and continuing the practice of mailing unrequested cards to consumers until it was banned in 1970.
Invention of plastic credit cards: American Express was the first issuer to offer a plastic card, beginning in 1959.
Introduction of revolving balances and general-purpose use: BankAmericard introduced the concept of carrying a balance from month to month in 1958. Then, in 1966, they upped the ante even further by offering the BankAmericard nationally as the first general-purpose credit card.
Development of competing credit card networks: Along with Diners Club in 1951 and BankAmericard in 1958, American Express offered its first credit card in 1958. Mastercard was founded several years later, in 1966, and BankAmericard turned into Visa in 1976 after splitting off from Bank of America. Discover joined the game relatively late in 1985.
Magnetic stripe technology: In the 1960s, IBM developed magnetic stripe technology, which could be used for electronic card verification at merchants. American Express used this technology on certain airline cards as early as 1970, but it wasn’t until 1980 that this technology began rolling out on credit cards from the other major networks.
Credit card rewards: The Discover Card introduced the concept of giving cash back on purchases in 1986, and the practice became more common from the 1990s onward. Other types of credit card rewards have also developed, as many cards offer points or miles.
EMV technology: The EMV chip in your credit card helps keep transactions more secure, as it’s more encrypted than a magnetic stripe and it creates unique transaction codes that can’t be used again. This technology was first used in the U.S. in 2010, but picked up quickly from 2015 onward when merchants were mandated to accept the technology or face liability for fraudulent transactions. Around 1.6% of all U.S. payment volume was on EMV cards in 2015, compared to 99% today.
Contactless payments: Since 2008, some credit cards have offered the ability to make contactless payments, without the need to insert a card into a reader. As of 2020, around 67% of merchants accept contactless payments.
Virtual credit card numbers: A technology introduced in 2009 lets you shop online using your credit card without actually exposing the card’s sensitive information. These virtual credit card numbers are a way to stay safe from identity theft and fraud in an age where there is a growing number of data breaches.
Use of credit explodes: Only 51% of households had a credit card in 1970, but that number has grown to 83% in 2021, which is a testament to how much Americans have embraced credit cards over time. We’ve seen monstrous growth even since the turn of the century, too. In 1999, there were around 365 million credit card accounts open. In 2020, there were over 511 million accounts. That’s around a 40% increase!
Our credit card debt has skyrocketed, too. In 2017, U.S. consumers hit $1 trillion in credit card debt for the first time, and despite some payoffs, we’ve stayed close to that number ever since. We currently owe more than $920 billion to credit card companies, or a bit over $7,800 per household.
The nature of credit cards clearly has evolved a great deal over time – and so has our use of credit.
In light of the rich, interesting history that credit cards possess, we turned to a panel of leading subject matter experts to learn more. You can check out their bios and responses to the following questions below.
- Will credit cards be used 15 or 20 years from now? In what form?
- How long do you anticipate credit cards being the dominant form of payment?
- How has the rise of credit cards changed consumer spending habits - for better or worse? And what impact do you think market changes over the next decade-plus will have?