Credit Cards

Timeline: The History of the Credit Card

Merchants start extending credit to favored customers while oil companies provide “courtesy” cards to automobile owners to pay for gas at company-owned gas stations. Customers were billed at the end of every month and had to pay the total amount to retain usage rights.1
Early 1920s
History of the Credit Card 1920s
Year 1928
History of the Credit Card 1928
The Charga-Plate was developed. Large scale merchants would begin to issue these to customers to use as a store credit card.2
A Brooklyn banker, John Biggins, partners with local merchants to launch a “Charg-It” card and offers it exclusively to banking customers. Bills had to be settled every month.3
Year 1946
History of the Credit Card 1946
Year 1950
History of the Credit Card 1950
The Diner’s Club® card is introduced as a charge card for travel and entertainment expenses. Within one year, 42,000 consumers become cardholders.4
Bank of America launches the “BankAmericard” as the first revolving credit product issued by a third-party bank that charges a nominal fee to consumers to carry a balance over from month-to-month.5
Year 1958
History of the Credit Card 1958
Year 1959
History of the Credit Card 1959
The American Express® Card, which debuted a year earlier, is the first to switch from paper to plastic, and gain international acceptance. 6 By the end of 1962, there are over 900,000 cardholders.7
A group of California banks form the Interbank Card Association (ICA). They launch the second major bank-issued card, Mastercard.8
Year 1966
History of the Credit Card 1966
Year 1971
History of the Credit Card 1971
First Data is founded in Omaha, Neb., providing processing services to the Mid-America Bankcard Association (MABA).10
International partnerships and licensing agreements spur the decision to change the BankAmericard name to Visa.9
Year 1976
History of the Credit Card 1976
Year 1976
History of the Credit Card 1976
First Data becomes the first processor of Visa and Mastercard bank-issued credit cards.11
American Express buys 80 percent of First Data Resources (the remaining 20 percent was purchased in five percent increments each subsequent year until June 1983).12
Year 1980
History of the Credit Card 1980
Year 2014
History of the Credit Card 2014
Apple® launches Apple Pay™.13
EMV® liability shift goes into effect in the United States, meaning merchants not accepting chip cards could now be held responsible for fraudulent in-person credit transactions. Previously, card issuers were liable.14
Year 2015
History of the Credit Card 2015
Today
History of the Credit Card Today
75.7%, of U.S. consumers own at least one credit card and the numbers are increasing, with 10 million new consumer cards issued in 2016.15
Credit Card Design

Credit Card Design

Initially, credit cards featured cardholder name, account number, and card expiration date along with logos of the issuing bank and card network. Over the years, additional features have been added to improve the transaction process and help combat fraud.

1969 Magnetic Strip Embedded with cardholder information, it enabled merchants to swipe the card and increase the speed of the transaction.16

1997 CVV Code (Card verification value) A 3- or 4-digit code, it was added to the back of cards (or front of American Express) to combat Card-Not-Present (CNP) fraud resulting from the growing popularity of online shopping.17

2004 EMV Chip As fraudsters found avenues to steal payment data and create counterfeit cards, Europay®, Visa and Mastercard joined forces to introduce the EMV chip as an additional security feature. Today, almost every credit and debit card in America is embedded with an EMV chip.18 (Learn more about EMV.)

The Mechanics of Accepting Card Payments

The Mechanics of Accepting Card Payments

The Credit Transaction Process: How It Works

Step 1

Cardholder swipes or inserts their credit card into a payment terminal to transfer their information into the merchant’s POS system in-store. For eCommerce payments, the cardholder either enters it manually at checkout or confirms a stored payment option.

Step 2

The card information is sent electronically to the merchant’s acquiring bank or payments processor (such as First Data), which routes the transaction to the right card network (Visa, Mastercard, Discover or American Express). eCommerce payments also require a “gateway” provider whose role is to connect the merchant’s website to the acquirer.

Step 3

The network forwards the transaction to the issuing bank. They confirm the card’s validity (to ensure it hasn’t been reported lost or stolen) and confirm the cardholder has available credit.

Step 4

If the transaction is approved, the issuing bank generates an authorization number and routes it back to the card network, signifying they are willing to fund the purchase on behalf of the cardholder.

Step 5

The card network then forwards the authorization number back to the acquiring bank or payments processor, which forwards the number to the merchant, who finalizes the transaction with the customer.

Source

1 “The History of the Credit Card,” NerdWallet, 10 February 2017

2 “Charga-Plate in Red Leather Case, United States, 1950's,” National Museum of American History

3 “Who Invented the First Bank-Issued Credit Card?” CardRates.com, 24 May 2018

4 “History,” Diners Club International

5 “Introducing the Modern Credit Card from Bank of America,” About Bank of America, 13 August 2014

6 “The Evolution of the Credit Card: From Paper to Plastic to Virtual,” Relatively Interesting

7 “American Express Company,” The Columbia Encyclopedia, 6th Ed, 2018

8 “We've Been Making History for 50 Years,” Mastercard History & Key Milestones

9 “Visa: A Short History,” CreditCards.com, 30 March 2007

10, 11, 12 “History,” First Data

13 “Apple Announces Apple Pay,” Apple, 31 August 2018

14 “EMV Arrived on October 1, 2015. But It's Not Too Late to Adopt EMV Technology,” First Data

15 “Credit Card Ownership Statistics,” CreditCards.com, 26 April 2018

16 “Magnetic Stripe Technology,” IBM Corporation

17 “Can Credit Card Security Codes Sufficiently Protect Against Fraud?” Chargebacks911, 23 August 2018

18 “EMV Roots Go Deep in Europe,” Bank Information Security, 7 March 2011