A BRIEF HISTORY OF CREDIT CARDS
Love them or loathe them, credit cards are deeply ingrained in our culture. Whether you think they are the greatest financial innovation since cash or the work of the devil it is becoming increasingly difficult to live without a credit card. Australians owe an average of $4 400 on each credit card and we generally have more than one each.
But they haven’t been round all that long really.
Credit cards have been in limited use in Europe since as early as the late 1890s, although they didn’t really get going until the 1920’s in the United States. Back then, hotel chains and oil companies started issuing cards to valued customers.
Just after the second world war things really started to heat up. A go-ahead banker, John Biggins, kicked things along when he introduced his Charge-It card to his customers at the Flatbush National Bank in Brooklyn, New York.
The Charge-It card allowed customers of the bank to make purchases at local merchants who were also customers of the bank.
In 1951 Franklin National Bank, also in New York, introduced the first bank credit card. It too could only be used by customers of the bank, but it triggered a wave of other banks to issue their own cards.
1955 saw the arrival of the first card, we would recognise when Diners Club enabled its 200 000 members to use their cards for purchases in more than a dozen countries. Since 1950 they had only been able to use it to pay for meals at upscale NY restaurants.
American Express quickly reacted and issued its first charge card in 1958 and within five years, had issued more than 1 million cards which were in use at approximately 85,000 businesses around the world.
The rot really set in when in 1958 Bank America introduced its BankAmericard (which in 1975 was rebranded Visa). This was the first true bank credit card to provide a revolving credit balance facility together with interest. This was intended to simplify the lives of model class Americans who maintained credit facilities with numerous merchants.
Soon lots of other banks joined in and a group of them established 'Mastercharge' (which became Mastercard) was established in 1966 as a competitor to BankAmericard.
In 1974, Australians got in on the act with the launch of BankCard. Because of the cost of establishing a nationwide network, all of the banks got together to launch this new credit card.
Within eighteen months there were 1 054 000 cardholders, and 49 000 merchants signed up.
40 years later, almost 8 million Australians have at least one credit card and together owe $34 billion on which they pay nearly $800 a year in interest.
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Vince Scully | LifeSherpa
With over 25 years in Financial Services from consulting to management, Vince Scully is the go-to guy for wealth management and financial advice. Vince founded the Calliva Group; a fund manager, product issuer, advisor and lender to Government and private clients. Vince is an advisor to the Wealth Management Industry, and prior to his role as CEO at Calliva, a senior member of Macquarie bank’s infrastructure team.