Credit Matters

Today most of us take for granted those little plastic cards we carry in our wallets. We wouldn’t know what to do without our debit or credit cards. In addition, it can be very difficult, if not impossible to reserve a hotel room, rent a car or even purchase an airline ticket without our trusty little credit card. So how did all this start? When did we take our first steps towards a cashless society?

In 1877 the term “credit card” was first used by a lawyer and author named Edward Bellamy. Bellamy, a socialist, describes in his book, “Looking Backward 2000-1887,” how a well to do man from 1887 awakens to find himself in the year 2000 in what appears to be a socialist utopia.

In this utopia, every person was issued a yearly credit card by the government. On the front of the card was stamped a dollar amount that represented each person’s “share of the annual product of the nation.” The beauty of this was in its simplicity: no one ever needed to carry cash. If you needed to purchase something or pay your electric or gas bill you simply used your credit card. The amount of your purchase or payment would be deducted off your credit card, which was basically a transaction between you and the federal government.

Although we haven’t quite progressed to the point that Bellamy wrote about, we have made strides toward a cashless society. In the early 1900’s some of your more prestigious hotels started issuing charge or credit cards to their most influential guests. This allowed their guests to stay at the hotel multiple times during a month and then make one payment at the end of the month. As you might imagine, the wealthiest of the hotel’s clientele saw this as a major perk and the hotel saw an increase in business.

This was not lost on the department stores and gas stations. They were next to jump on the bandwagon. Each store or gas station chain started issuing their own credit cards to try to lure new business and increase sales. Consumers thought this was outstanding, but as we’ll see later, many people found themselves in a bit of a bind because of their new found pot of gold.

A few years later, around 1947, the railroads and airlines decided it was their turn to test the waters and soon most major airlines and rail companies were issuing credit cards in hope of generating more business. The consumers thought this was a wonderful idea. They now had a credit card for their department store purchases, to fill up at the pump and to buy their airline tickets.

So who was the first to really take advantage of the credit card industry? Most of you are probably too young to remember, but around 1950 Diners Club introduced a credit card that was accepted at more than one department store or gasoline chain. Diners Club was the pioneer of the credit cards you and I use today. The plan was really very simple: instead of providing a specific service for one company, Diners Club pulled together a group of restaurants and acted as the middleman between the customer and the restaurant. This worked out so well for Diners Club that they expanded into the travel and entertainment businesses as well. Soon, Diners Club was the card to have. Imitation is the sincerest form of flattery and in 1958 American Express decided they wanted a piece of the market. But unlike Diners Club American Express want to attract not just domestic customers but international travelers as well. So in addition to basic credit card services they decided to provide other services like secured traveler’s checks, mail and message exchange services, and even legal aid for their members. These additional services help American Express establish a strong customer base.

Another company that decided to get into the credit card business was Bank of America. They introduced a card that would become the Visa credit card as we know it today. In 1966 a group of banks got together to form MasterCharge. This was an effective way for travelers across the country to purchase goods and services without having to worry whether or not their check would be accepted.

But it wasn’t until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. With the magnetic strip came the ability to complete transactions very quickly. Because identifying information is stored on the credit card it became more efficient for merchants to approve transactions by verification through a credit card approver such as a bank or credit card company.

Today there is a type of credit card that fits just about every situation and every type of consumer or business. The following table list just a few types of credit cards available today:

• Visa
• MasterCard
• Gas Rebate Credit Cards
• Travel Rewards Credit Cards
• Student Credit Cards
• Business Credit Cards

The list goes on and on………..

As you can see we are not to far away from what Edward Bellamy describes in his book, “Looking Backward 2000-1887.” While we didn’t go the route where the government issued the credit cards and allocated how much we could charge, we have come a long way towards a cashless society.

There are many who debate the Pros & Cons of a cashless society and I may tackle that debate at a later date but one thing is certain, we are very close to a cashless society. Not to far off from what Edward Bellamy wrote about over 200 years ago.

For more interesting facts about credit cards, credit score or credit repair tactics visit CreditCardMonitor.Org.