Unveiling the Evolution of Credit Cards: From Diners Club to Magnetic Stripes and Beyond

Featured & Cover Unveiling the Evolution of Credit Cards From Diners Club to Magnetic Stripes and Beyond

When credit cards were first introduced in 1950, Americans were already familiar with the concept of buying on credit through personal loans and store credit accounts. However, the introduction of the Diners Club card, the first modern charge card, revolutionized spending by allowing customers to use their cards at various restaurants and settle the balance at the end of the month. This marked the beginning of a cashless consumption era.

By the end of the 1950s, the majority of Americans had adopted the idea of buying now and paying later. In 1958, Bank of America in California launched the BankAmericard, the first general-purpose credit card that could be used anywhere it was accepted. Unlike the Diners Club card, the BankAmericard allowed customers to carry a balance into the next month, as long as they paid the interest. By 1966, the practice became widespread as more states licensed the BankAmericard, which was rebranded as Visa in 1970. Here are five intriguing facts about the history of credit cards.

Women Couldn’t Have Their Own Credit Cards Until 1974

In the mid-1970s, women faced significant challenges when applying for a credit card. Married women could only obtain cards under their husband’s name, and single women needed a male family member to co-sign. Even if a woman could make payments on her own, she might still be denied credit, severely limiting her financial independence. In a landmark decision in 1971, the Supreme Court ruled that giving men more financial power than women solely based on sex was unconstitutional, violating the Equal Protection Clause of the 14th Amendment. This decision paved the way for the Equal Credit Opportunity Act of 1974, which prohibited denying credit based on gender, religion, or race.

The Credit Card Was Invented After a Man Forgot His Wallet

In 1949, New York businessman Frank McNamara forgot his wallet during dinner and had to rely on his wife to pay the bill. Determined to avoid such embarrassment again, McNamara and his partner Ralph Schneider created a membership card allowing restaurant patrons to settle their bills monthly instead of carrying cash. This card, made of cardboard, charged participating restaurants a 5% to 7% processing fee. Within a year, the Diners Club card gained around 42,000 users across the United States, establishing the concept of credit cards.

The BankAmericard Lost Millions of Dollars at First

In September 1958, the Bank of America surprised Fresno, California, residents by mailing out 60,000 unsolicited BankAmericards. This launch, led by manager Joe Williams, was based on arbitrary decisions: credit limits ranged from $300 to $500, and “floor limits” for smaller purchases that didn’t require retailers to call the bank ranged from $25 to $100. Williams assumed most customers would repay their loans on time, but he was wrong. In its first year, after distributing an additional 20 million cards across California, the BankAmericard lost millions of dollars, leading to Williams’ resignation. This initiative also inadvertently gave rise to another issue: credit card fraud.

The First Magnetic Stripe Card Arrived in 1969

Magnetic storage, a technology developed in the 1930s for storing data using magnetized materials, was improved over the years for use in early computers. In 1960, IBM engineer Forrest Parry used this technology to embed magnetic tape onto ID cards for CIA officials, which contained agent information. IBM project manager Jerome Svigals refined this technique and applied it to credit cards. The magnetic stripe could store user information, banking data, and purchase history, making it easier to detect and prevent fraud. In 1970, “magstripe” cards were introduced to the public through a collaboration between American Express, American Airlines, and IBM.

American Express Was the First Rewards Card

American Express pioneered two features that are now standard in credit cards. The bank launched its first credit card in 1958 and, in 1959, became the first major company to issue plastic cards instead of cardboard. Decades later, in 1991, Amex introduced the first rewards program, Membership Miles, a frequent-flyer program. For every dollar spent, customers earned points toward travel and accommodations at select airlines and hotels. This program also offered incentives: while all American Express members could participate, only Gold and Platinum cardholders received additional perks.

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