Credit Cards. They are what they are. You either love them or you hate them, but the fact remains that they are a major part of the present world. Buy now and pay later has become the motto for modern-day culture, thanks in part to that little piece of plastic 7 out of 10 people carry with them at all times.
I’ll be perfectly honest: I hate credit cards.
Not because I believe credit cards are evil or are out to simply ruin the lives of millions of people. To be perfectly honest, I just sucked at using them. I remember my first credit card came with a “Free” seven thousand dollar T-Shirt via the Memorial Union at Arizona State University.
“Hey kid, become a real man by grabbing this credit card and I’ll give you a free Arizona State t-shirt”.
Fast forward only a few years and I failed at simple 5th grade math. I was part of the majority of Americans who carried a balance, paid 24.99% interest at all times, and made only the minimum payment.
Don’t worry Mom & Dad, I am just building my FICO score!
A few years later, I was successful in racking up $52k of debt and ended up going broke in a blink of an eye. Was it the credit cards fault? Hell no! Was it the bank’s fault? Absolutely not. It was simple: I sucked at using credit cards.
I am right on the edge of being a Millennial (1983), and for most of us it is almost impossible to even imagine life without the Internet, The Simpsons, and you guessed it- the credit card.
I have always said that we lack financial literacy education as a entire society (not just Millennials), and that includes learning about how this whole credit card thing was started. Credit cards are a way of life for most people today. Don’t believe me?
The Fun Facts
72% of adults have a credit card
37% of College Students has a credit card
There are enough credit cards to span the Earth 3.5 times
Credit card companies spend roughly $80 to acquire you as their customer and on average that customer returns $120/year to the credit card company
Credit card interest rates are actually illegal in most states
The average person using a credit card carries 3.7 credit cards in their wallet
As of December 2015, there was $925.2 Billion of Outstanding Credit Card Debt
The average credit debt in 2015 is $15,779
So, how did we get here? I’m glad you asked 
The Credit Card Timeline
1946
John Biggins, a banker from Brooklyn, NY, came up with the idea of the “Charg-it” card. This card allowed a consumer to pay a merchant by using the card. The merchant would then take the sales slip to Biggins’ bank and the bank would collect payment from the consumer. However, the “Charg-it” card could only be used locally in Brooklyn and the customer had to be a member of John Biggins’ bank.
1950
Frank McNamara is having dinner at a restaurant in NYC and realizes he forgot his wallet when the bill comes. He comes up with an idea for a closed loop system where consumers could use a form of a credit card to pay the restaurant, the restaurant would then invoice the bank, and the bank would collect payment from the consumer at the end of the month. He named it the “Diners Club Card” and it was solely used for upscale restaurants inside NYC. The card was made of cardboard in the initial days and soon moved to a celluloid paper base. However, poor Frank thought his idea was just a fad, and sold his idea for a whopping $200k, or equivalent to $1.6 million in today’s dollars. Oops.
1951
New York’s Franklin National Bank issues the first actual Bank Credit Card. This credit card allowed only it’s account holders to use the credit card with merchants who had partnered with the bank, still limiting where the credit card would actually be accepted.
1955
The Diners Club Card grows to 200,000 members and branches out to restaurants and others services in more than a dozen countries.
1958
American Express joins the credit card industry with their Purple Charge Card that was solely used for travel and entertainment purposes. They were also the first to move to a plastic card, similar to what we have today.
1958
A California bank called “Bank of America” launches its first revolving credit card product to consumers and labels it the BankAmericard. This product was launched in Fresno, CA and 60,000 unsolicited offers were sent out through the mail to the people of Fresno. This would be the first time ever unsolicited credit card offers are “dropped” into the mailboxes like they still are today. In 1976, BankAmericard would later become known as VISA.
1966
Up until this point, each bank would have to issue their own credit card to their consumers. Multiple California banks decided to work together and formed the Interbank Card Association (ICA). This allowed multiple banks to transfer funds and work together in an “open-loop” system, versus the closed loop of the earlier days. ICA later changed their name to MasterCharge, and then became what we know them as today: MasterCard.
1970
American Express issues the first credit card with the magnetic strip. Although the technology was available, it wasn’t widely used until a decade later in 1980 when VISA and MasterCard both added magnetic strips to their cards. The magnetic strip would take the account holder’s information, contact the bank to determine sufficient funds were available, and report back an “Approved” or “Declined” status all within a few seconds.
1973
Credit cards finally become automated. Before this time, the merchant would have to contact the bank, the bank would have an employee look up the record of the account holder, and then the bank would notify the merchant if the employee had available credit. This process would often take up to 5 minutes, however the use of automation sped this up to less than 1 minute per transaction. Today, the transactions are almost instantaneous.
1976
After Bank of America gave up full control of the the BankAmericard card to other banks across the world, it became apparent that the need for a open-loop system similar to their competitor MasterCard. The BankAmericard group formed the name, VISA.
1986
Sears realizes they can increase profits by selling more than “stuff” inside their stores and launches it’s own credit card program. Their credit card would soon be called the Discover Card. They are also the first to offer a “cash back” rewards program. The very first ad glimpse of Discover Card appearedin this Superbowl XXI commerical below.
Watch the Commercial
1987
American Express offers up their first credit card product where you don’t have to pay it off on full, joining the other credit card issuers around the world offering revolving debt.
1989
Citi Bank partners with American Airlines to offer the first Credit Card Travel Rewards Program. This opens up the floodgates to an era of the credit card rewards program.
2004
Credit cards become widely accepted at McDonalds, and other fast-food restaurants soon follow suit. The following year it is estimated that American families spend $420 million per week on fast food using their credit cards.
2014
The United States starts accepting the “smart card”, which is a tiny circuit board inside the credit card that hold all the same information as the magnetic stripe. The main difference is the chip has a “rolling code”, meaning the data is scrambled after each use, thus making it much more secure.
The Future of Credit Cards
Many believe our smartphones will actually replace the credit cards that have been carried inside our wallets since 1946. Others believe that our biometric thumbprints may be used as our form of payment instead of the soon-to-be outdated credit card. Whatever it may be, I think we can all agree that credit cards have come a long way from the initial pieces of cardboard that could only be used locally and through one single bank in Brooklyn.
Money Peach on Credit Cards
After paying off our $52k of debt in 2011, creating a fully funded emergency fund, and building wealth, we decided we would go through life without a credit card. My wife and I are one hundred percent positive that our behavior with money has completely changed and we are well beyond the level of discipline required to have a credit card and pay it off each month. However, until we meet a millionaire who tells us the secret to their success was having a credit card and earning the free miles, we will pay with this green paper stuff. I believe they still call it cash.
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-Chris Peach
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