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February 18, 2011
AGENDA
HISTORY OF CREDIT CARDS
TERMINOLOGY
TEN BENEFITS TO ACCEPTING CC
PROS AND CONS
SELECTION OF MERCHANT SERVICE
PROVIDER
QUICKBOOKS RELATED PRODUCTS
DISCOUNTED RATES FOR MEMBERS
APPLICATION
CUSTOMER SERVICE
HISTORY OF CREDIT
CARDS
• Today, credit cards are ubiquitous. Everyone from department stores to savvy street vendors accept plastic. While definitions vary, the first true general purpose credit card with multi-state acceptance was most likely issued by Bank of America in 1966. There were many predecessor cards issued starting from the late 1800s. Milestones included the proliferation of store specific cards during the 1920s, cross acceptance of store cards in the late 1930s, the first bank issued debit card, "Charg-It" by Flatbush National Bank of Brooklyn in 1946, and the first widely used cardboard Charge Card by Diner's Club in 1950--though it required payment in full at the end of each month.
The concept, and even the name "credit card," was used as early as 1887, when the socialist writer Edward Bellamy included credit cards in his Utopian novel, Looking Backward. It was not until the 1920s, however, that merchants established a system by which their frequent customers could purchase goods and services on credit. These early credit pioneers primarily used the system to sell fuel, but telegraph company Western Union also got in on the game as early as 1921.
Initially, businesses would only accept their own cards--a far cry from the use-it-anywhere convenience that today's shoppers enjoy. By 1938 some companies had started to recognize one another's cards, accepting them as payment, but these were "charge cards," extremely different from today's plastic.
As anyone who has had a credit card knows, balances can be carried over from month to month (along with
interest of course), but that wasn’t the case with early charge cards. These payment methods, including the
Charga-Plate, Diners Club card and even the first American Express cards, required that users pay off their entire balance each month, severely limiting the use of the cards as well as the profit that could be made from them.
The consolidation of existing cards allowed the remaining ones to become accepted in a wider variety of locations and soon, card companies began attempting to offer revolving credit, which could be carried over indefinitely with the accrual of regular interest. The first lender to succeed in offering a true credit card was Bank of America with the BankAmericard in 1958. Though this was the first "revolving credit" card, it was accepted only in California due to federal banking regulations. In 1966, Bank of America set out to address the problem by forming licensing agreements with banks in other states and overseas, an effort which eventually led to the creation of Visa. In 1967, four banks in California set out to compete with Visa by establishing Master Charge. The groundwork was laid for what would become MasterCard, as the Master Charge merged with Citibank's Everything Card.
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While there have been significant advancements in the realms of credit card production, security, and applications, the basic structure has remained the same since the very first Bank Americard. After applying for and receiving a card, consumers may use it at any affiliated merchant, purchasing goods and services up to their personal spending limit. Anything not paid off at the end of a period (usually a month) accrues interest, which must eventually be paid to the card-issuing bank.
