Where Did Credit Cards Come From?

U.S. credit card spending reached $2.2 trillion in 2012, an 8.4% increase from 2011, according to an analysis by MasterCard. That’s a lot of money going back and forth by way of plastic, especially when you consider the fact that credit cards have only been around for about 50 years.

Credit cards as we know them — with their Visa, MasterCard, Discover and American Express logos in the corner — first emerged in 1958, when Bank of America started BankAmericard. That was the first consumer credit card available to middle-class consumers and small- to medium-sized merchants in the U.S., according to Visa’s website —BankAmericard was the first of the global brand of products that became Visa.

MasterCard came along in 1966 (the same year a debit card pilot program began at the Bank of Delaware), but the roots of the credit card go back even further.

It started in Brooklyn, when the Flatbush National Bank issued cards for local use in 1947. Local merchants could deposit sales slips at the bank and the bank billed the customer who made the purchase. But the big industry breakthrough came in 1950 when the Diners Club card became the first charge card — Diners Club founder Frank McNamara was at dinner and realized his wallet was in another suit, which inspired him to create the card. It allowed restaurant patrons to settle their bill at the end of each month.

These were charge cards, which means the cardholder had to pay his or her account in full when billed, unlike credit cards, which allow you to carry a balance. (Credit cards can be helpful in emergencies and for financing large purchases, but the shift from charge to credit cards has enabled overspending, which has contributed to the $856 billion in outstanding U.S. credit card debt. Perhaps we should have stuck with this charge-card thing.)

American Express also started offering charge cards in 1958, but didn’t offer credit cards until 1987.

It seems almost crazy now to think that credit cards were just getting started about half a century ago. Oddly enough, you’re still sort of stuck if you forget your wallet when eating out, which is funny when you think of how that was the issue credit cards were originally intended to solve. Perhaps mobile payments will finally fix the problem Frank McNamara encountered in that restaurant many years ago.

Until then, credit cards can have a major impact on your credit scores. You can understand their impact by checking two of your credit scores for free on Credit.com.