Credit is much older than the card
Buying now and paying later is an old practice. Merchants have long kept accounts for trusted customers, and shopkeepers kept ledgers of what was owed. What the card added was a portable, standardized way to prove that an account existed, plus, eventually, a way for one card to be accepted at many businesses. That is why the history can be told in several steps, and why different people claim “first.”
Store cards and charge plates
In the early twentieth century, some businesses began issuing identifying items to favored customers. Reports from the 1910s and 1920s mention hotels, department stores and oil companies that distributed metal tokens or cards, sometimes called charge coins or charge plates. A department store’s metal plate carried a customer’s name and account number, and a clerk would press it onto a sales slip to imprint the information. The plate could be used only at that store, or at that company’s own locations, so it identified a customer rather than offering a general-purpose payment method.
Western Union is often cited as having issued a card to certain customers in the 1910s, and some oil companies issued cards to motorists in the 1920s. These examples show that companies were already using cards to simplify credit, but they were limited to one issuer.
The Charg-It experiment
In 1946, John Biggins, a banker at the Flatbush National Bank of Brooklyn, is credited with starting a system called Charg-It. Customers received a card, and local merchants accepted it, then sent the sales slip to the bank, which billed the customer and paid the merchant. This is sometimes called the first bank-issued card, and it did cover multiple merchants. The scope was local, limited to a small area of the city, so it did not spread nationally.
Diners Club, 1950
The card that most writers treat as the first general-purpose one is the Diners Club card, introduced in New York in 1950. The company was founded by Frank McNamara and Ralph Schneider. The popular story is that McNamara realized he had forgotten his wallet at the end of a restaurant dinner and thought of a way to avoid such embarrassment. The tale is entertaining and has been repeated for decades, but it is best regarded as a company legend, since details vary among tellers.
What the company did is better documented. It signed up restaurants, and later hotels and other businesses, to accept its card, and it recruited members, who were often business people who dined out. A member paid at the end of the month, and the merchant paid the company a percentage of the bill. Early cards were made from cardboard, and the number of members and restaurants was small at first. Later the system grew steadily, and other firms entered the field.
Diners Club cards are generally called charge cards, meaning the full balance was due each month, as opposed to credit cards, which allow the customer to carry a balance and pay interest. This distinction explains much of the dispute. If “credit card” means any card for paying later, Diners Club or earlier systems may be first. If it means a card with revolving credit, the answer lies in the late 1950s.
Bank cards arrive
In the late 1950s, American banks turned to cards. In September 1958, Bank of America in California launched a card in Fresno, which it mailed unsolicited to many residents. That card, later named BankAmericard, offered revolving credit: a customer could repay over time and pay interest on the unpaid balance. The mass mailing caused trouble, including losses from fraud and unpaid accounts, and the program struggled in its first years before the economics improved. The decision to send cards to people who had not asked for them was later restricted by law in the United States.
In the same year, American Express introduced its own card, first made of paper and then of plastic in 1959. Other banks created their own cards, and in the 1960s, groups of banks formed associations that allowed their cards to be accepted by merchants across different banks. The bank association that came to be called Master Charge in the late 1960s is one example, and Bank of America’s system eventually became a separate organization.
Technology and standardization
Early cards depended on manual processes. A merchant would use an imprinter to press the raised letters of the card onto a carbon-paper slip. A printed list of lost or stolen account numbers might be checked by hand. Over time, the magnetic stripe, which was introduced in the 1960s, allowed machines to read the account number and made electronic authorization possible. Terminals connected through telephone lines let a merchant confirm that a card was valid and that the purchase fell within the limit. Eventually, networks that handled payments across many banks became large computer systems, and the technology of wide area networks became important for finance. Cards later added chips, contactless features and online payment options, and as fraud moved online the work of cybersecurity became part of the business.
Social effects and cautions
Cards changed how people shop. They made it easier to travel, to buy by mail and phone and later online, and to handle emergencies. Consumers also gained a record of spending. Credit cards raise questions about debt, because interest on an unpaid balance can accumulate, and different cards have different fees and rates. This article is a history and not financial advice; anyone choosing a card should read the actual terms of the offer.
So which was first?
A careful summary would run as follows:
- Store charge plates and company cards existed before 1940, but were limited to one business.
- Charg-It in 1946 was a local bank scheme covering multiple merchants.
- Diners Club in 1950 is the most common answer for the first general-purpose charge card.
- The first widely used bank credit card with revolving credit is usually associated with Bank of America in 1958.
Each claim is correct under its own definition, so the most honest answer depends on the definition you choose.