History Of Credit Cards

The earliest known use of money occurred in Mesopotamia around 2500 BC. Replacing the barter system, in which one good was exchanged for another, the use of money brought about an explosion in the variety of goods available. The next big wave in the history of human financial transactions came with the concept of Credit.

The concept of credit revolves around deferred payments - the ability to purchase products and services and actually pay for it at a later time or over a period of time. Credit was first used in Assyria, Babylon and Egypt some 3000 years ago. The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly.

The origination of credit cards in the United States occurred in the 1930's and became widespread in the 1950's. In 1951 Diners Club became the first to issue a credit card that could be used in various locations. Early credit cards required payment in full in less than 90 days. Soon after, Franklin National Bank in New York introduced the first modern credit card to its customers. They extended the repayment period and attached and interest rate creating a new revenue stream. This concept quickly became popular as banks everywhere began issuing credit cards. Cardholders liked the convenience and the line of credit offered by the new cards. Merchants found that credit card customers usually spent more than if they had to pay with cash. Handling the bank-issued cards was safer for the merchant and less costly than maintaining his own credit program.

The real impetus to the credit card industry came with the establishment of standards for the magnetic strip in 1970.The standardization meant the whole industry could follow same method of information storage. Now the cards could be used anywhere in the world. The phenomenal growth of the e - commerce industry changed the history of credit cards. In less than 50 years this simple concept has become one of the largest industries in the world. To give you an idea of the magnitude of the credit card industry, MasterCard products are issued by approximately 23,000 financial institutions in 220 countries and territories. In the year 1998, it had almost 700 million credit cards in circulation, whose users spent a whooping $650 billion in more than 16.2 million locations. Visa has nearly 600 million credit cards in circulation and more than 14 million locations accept it!