Now, in the 21st century using credit cards seems to be a way of life that is generally taken for granted. Whatever needs or wants can't be met with cash, can easily be obtained via credit but credit cards have quite an interesting history. The idea of credit itself has existed in some form since around the late 1700's. A furniture salesman wanted to offer his customers a chance to furnish their homes immediately, while taking a little longer with to pay. He introduced the idea of "buy now and pay later". Since this is clearly an appealing idea to all parties involved, the idea was easily accepted and adapted by other merchants. By the twentieth century banks were offering a form of credit protection for themselves. Overdrafts were created to cover account balances when customers did not have enough in the account to cover their cheques and withdrawals. Again, beneficial to both parties as the banks did not lose money because they offered the clients extra funds (that they had to pay back) and the client had a little room to breath while waiting to put money into his account. Overdraft protection is something that continues to be widely used today. While credit was being established, various lenders were taking new risks and offering various forms of credit. 1914 saw Western Union giving their privileged customers a metal card that allowed them to have interest free deferral payments. Known as "Metal Money", it gave clients some freedom to spend beyond their means. That's an idea that certainly soared!

On to actual credit cards

How did they actually come up with a card that allows spending now and paying later? With the idea of a card that actually lets you pay like you have cash, it did not take long for other companies to get highly involved. Keep in mind, credit was not offered to the masses as it is now. Select companies were getting on board with this idea and offering preferred customers some spending freedom. The General Petroleum Corporation was one of the first companies to offer an actual credit card that allowed for fuel and automotive repairs to be purchased on credit. When first introduced, it was only available as a perk to employees. They could use their card, fill up or fix their vehicle, and make payments towards these things with portions of their paychecks. However, the cards were so popular with the employees and their families that it did not take long for the corporation to extend this offer to the general public. Other major companies were following suit because they recognized that people could not afford to pay for expensive items all at once. For example, Henry Ford was very aware of the fact that people could not just purchase one of his vehicles outright and in 1930 car loans and financing were introduced and became available to the public. There was a period of time during WWII that credit use was restricted, but this only heightened people's desire to be allowed to "charge it" once the war was over. People were ready to move on with life, travel, have nice things in their homes, have nice vehicles, and they wanted it sooner rather than later. Credit made this possible on a restricted budget.

Would you believe I forgot my wallet?

Not exactly what a lady wants to hear from her date, but this simple sentence is what really pushed the credit card industry forward. In 1950, Frank McNamara was out to dinner with friends and realized when it came time to pay that he had forgotten his wallet and had no money. This simple act on his part created a trend that we know and live by today, the modern credit card. With a partner, he created the "Diner's Club Card". In his mind, no longer would people be bound to only the cash they had in their pockets when they were out on the town. Though at first it was primarily a business man's card, available for dinners and retail purchases while traveling, it soon became a much larger phenomenon. The Diner's Club Card became a national frenzy and even prompted a Hollywood movie. Business men loved the idea that they could pay for some of their travel expenditures and worry about the cost later and McNamara loved it because when people don't have cash in hand, they tend to spend more. By 1955 Western Airlines was the first airline to accept Diner's Club to pay for flights. Within ten years, every other major airline had followed suit. By securing the traveler's market in restaurants, airlines, and retail stores, McNamara and his partner paved the way for the current system of credit cards. It was an amazing business venture that has held it's success. In fact, Diner's Club is still one of the top five credit card options worldwide.

In the mean time

As the Diner's Club Card was exploding in the public market, banks and retailers were catching on. In 1951, Franklin National Bank offered approval on credit purchases which secured the retailer financially. While 1958 saw the introduction of the American Express, a card widely known and still used today, it was the Bank of America that revolutionized the credit industry. They were the first to offer the option to pay your balance in full at the end of each month OR make a small payment against what you owe while paying a small interest fee on the remaining balance. Just as with today's credit cards, this gave purchasers even more options because they no longer had to come up with the full amount each month. So, if they spent a little more than they should have, they could be comforted by knowing they only had to pay a portion of it. As well, they lender was happy because he earned interest on what was still owed. Though it is a system created almost fifty years ago, it is a deeply ingrained lifestyle in the modern world.

Getting organized

Credit was not only changing the everyday lives of the average person, but it was changing financial institutions as well. By 1966, it was realized that more organization was needed to keep track of credit card transactions. The entire credit system was growing beyond belief and more control was required. To the rescue came a combination of 14 United States Banks that created a group called Interlink that governed and regulated use of the precursors to the credit cards we know today as Mastercard, Visa, American Express and Diner's Club. While American Express had been around for sometime, Mastercard, or Mastercharge as it was known then, was not created until the 1960's which became the primary competition for the revolutionary BankAmericard. To extend their services overseas, BankAmericard became what we know today as VISA. Shortly after changing its name to secure a place across the Atlantic the name Mastercharge was changed to Mastercard. Today, both of these cards are well known and widely used. Each card offers a variety of styles and options in fees, interest rates, bonuses, and credit limits.

The magic magnetic stripe

One final revolutionary move that increased the use of credit transactions was the introduction of the magnetic stripe which allowed for quicker and more secure transactions, increasing people's ever-expanding use of their credit cards even more. Since credit cards are used so frequently and made so available, it's easy to understand why little thought is given to where they originated. Like most fabulous inventions, they came about through the simplest of intentions but evolved dramatically over time.