History in Plastic: Credit Cards

the tradition of the Christmas shopping season starting the day after Thanksgiving likely harkens back to Thanksgiving Day parades which starting around the 1930s traditionally had an appearance by Santa Claus at the end the first use of the term Black Friday to refer to that shopping day the day after Thanksgiving was actually in an industrial journal in 1951 and it was referring to the number of employees who would call off sick that day in order to go shopping the term indeed will become popular in the United States until the 1980s when retailers preferred a friendlier story which said that retailers tend to operate at a debt until the Christmas shopping season and so Black Friday represents the day when they move from red ink means they're losing money to black ink meaning they're making profit according to a household survey in 2018 consumers who added debt during the Christmas season added an average of one thousand two hundred and thirty dollars almost all of that was placed on credit cards money lending is one of the world's oldest professions probably goes back to the beginning of society that someone would lend you goods or grain or some form of currency in exchange for interest in fact some of the earliest written laws deal with debt and interest but the idea of a single piece of plastic that could be used to borrow and purchase almost everywhere took a long time to develop on this Black Friday the history of the credit card deserves to be remembered 5,000 years ago Mesopotamian civilizations were among the first to think of using a valueless physical object to take the place of large sums of cash in babylons trade with the harpin civilization archaeologists have found clay tablets with each civilizations marks and just promises that saved everyone from having to met the huge amount of coin that would have had to have changed hands in these ancient civilizations and up into the modern era one of the most common uses for credit was in loans of seeds that could be repaid with interest after the harvest until the 19th century most debt and credit was established as an agreement between the single lender and the Linde for the average person banks were often not involved the deals were between individuals and did not necessarily involve strict payment schedules some of these were tabs which were settled informally and of course there are always money lenders often tons group promising easy funds to cash-strapped farmers and businessman accompanied by high interest rates the use of larger loans developed for the super-wealthy and for businesses that would be backed by banks but these are usually agreements that were made individually and usually for a fixed amount the money could be used for a specific purpose but it wasn't like a credit line that could be used anywhere for anything the earliest modern predecessor to the credit card in the United States was a charge coined first introduced in the 1860s charged coins were made of celluloid or metal and ranged in design from the simple to the detailed and ostentatious they usually had some kind of a message on them the name of a particular store and a number linked to the customer's account these coins were distributed by a department store or taxi service or other business and we're usually unusable at a single location holders of the coin would show it to the cashiers at purchase and they would check it against the paper ledger that would tell them if the account was up to date these kinds of accounts usually needed to be paid off in full at the end of the month if they weren't debt collectors would go to the customers house and repossess whatever it was that hadn't been paid for by 1885 in addition to the charge coins that were paper slips that serve a similar purpose these paper cards had a signature and were accepted only in a particular location like the coins although sometimes they might be accepted at competitors as well if a person traveled the card was useless but to local businesses this is a positive as it encouraged loyalty to their store after the turn of the century growing prosperity in the United States was putting more expensive purchases within reach and more stores were extending credit to more people by 1914 department stores all over the country offered credit to their customers Western Union offered select customers metal plates that allowed them to defer payment gas companies like Texaco followed suit in the 20s and 30s with the growth of automobiles offering cars that could be used to finance gas and car repairs at their stations their item of choice was a playing card sized piece of paper which helped to standardize the size of the credit cards in use today in the late 1920s a New York company introduced the charge of plate small metal plate that looked like a dog Ted which often came with a leather cover the plates would have identifying information embossed on one side such as the user's name and address slipped into the back was a piece of paper that would be signed when a customer made a purchase the store could make an imprint to the card helping to simplify bookkeeping charger cards are made in use until the 1950s given to customers by large retailers like department stores sometimes a store even kept the card on hand only imprinting it when the customer made a purchase networks for these kinds of cards grew out of deals between local businesses who agreed to accept each other's plates a large network of new york department stores including Bloomingdale's and Gimbels joined together in 1948 in 1936 Airlines got into the credit business with the introduction of an air travel card conceived initially by American Airlines and the Air Transport Association the air travel card provided business Flyers with the ability to sign any receipt for a ticket and then pay for the tickets later it also gave them a 15% discount on one-way tickets the program quickly expanded to be accepted by 17 Airlines in addition to a car the system included a small charger plate like tag that was used to take an imprint by 1941 the card was accounting for half of the participating Airlines revenue all of these systems relied on the direct relationship between the store and the customer it wasn't until 1946 that banks became involved Jhansi Biggins a banker working at Flatbush National Bank in Brooklyn New York is often credited with coming up with the idea of a universal credit card he introduced the charge it a deal between the bank local businesses in the bank clients when customers paid with a charging card the business would build a bank which would in turn collect the money from the customer the basic rules for the modern credit card system were born the charger card usually worked with the businesses that within a few blocks of the bank but banks all over the country started to follow suit extending credit to their loyal customers by working with all the most popular stores in their area in 1949 Frank McNamara was having dinner in New York when it came time to pay the bill he realized he had forgotten his wallet fortunately for him his wife was able to pay for the meal but it was apparently the spark for a bigger idea in 1950 McNamara and his partner Ralph Schneider put together their idea for the diner's club customers would pay a three dollar subscription fee into getting diners card which would be accepted at its inception at 28 restaurants in two hotels in New York in its first year 10,000 of New York's elite joined the program Alfred Bloomingdale grandson of the founder of Bloomingdale's started dying inside the same year in Los Angeles a similar program later that year the groups met and merge with Bloomingdale becoming vice president the card was immensely popular becoming accepted in Canada Cuba and Mexico in 1953 and reaching a million members by 1959 Bloomingdale predicted that the day will come when the plastic card will make money obsolete as early as the 1930s some department stores had introduced revolving credit meaning if the bills did not have to be paid in full but could be paid in installments over several months in 1947 William Gorman instituted the concept at the L Bamberger & Company department store on customers to find its smaller purchases such as clothing over a six-month period with a 1% interest the total had to be covered in six months because women thought that it was psychologically unsound to continue paying for an item after it worn out in 1958 the Bank of America introduced the BankAmericard which would become Visa in California as the first general-purpose credit card accepted it more than just restaurants they started the program with a splash they mailed out 60,000 already activated credit cards to Fresno California customers within ten months the fresno drop had spread across the state and more than a million of the cards have been mailed out though the inevitable fraud costs the company millions the stunt was a success in 1966 Bank of America began licensing the card to be issued by other banks spreading the network nationwide a merger in the 1970s resulted in the creation of Visa in 1976 competitors proliferated American Express introduced the first plastic cards in 1959 replacing cardboard and celluloid the interbank card Association formed in 1966 that are rebranding as mastercharge and finally MasterCard but while people could now carry the cards they were incredibly vulnerable to fraud cards had raised numbers which were imprinted onto Carbon sheets using a zip zap or knuckle Buster machine that would run over the card this had to be delivered to the core would be manually checked against known frontal it accounts and that process to take days in the 1960s IBM employee Forrest Perry is credited with attaching a magnetic strip to CIA identity cards and IBM quickly developed the technology simultaneously creating the magnetic strip for cards and shortly the automatic teller machine which allow customers remotely access their funds from a bank the strip was introduced in a joint venture between American Express American Airlines in IBM at the Chicago O'Hare Airport in 1970 also streamlining the airline's ability to sell seats on the newly introduced Boeing 747s it wasn't however until 1980 that the technology became cost-effective enough to be adopted by Visa and MasterCard magnetic strips - are vulnerable to fraud so in the 1980s research was done that would lead to the EMV chip cards EMV originally stood for the credit cards that founded the standard europay MasterCard and Visa they were first introduced in Europe in the 1990s and starting in 2015 US retailers are required to accept chip cards or be liable for instances of fraud a series of laws and decisions helped to shape American experiences with credit cards as well in 1970 Congress passed the unsolicited credit card Act which made it illegal to send already activated cards to customers who had not requested one in 1974 the Fair Credit Billing Act attempted to rein in deceptive credit card practices require credit companies to allow customers to dispute charges a 1978 Supreme Court ruling allowed nationally chartered banks to charge out-of-state customers the same interest rates as set in the bank's home state which helped credit cards to take off nationally according to the World Bank in 2017 around two-thirds of Americans over the age of 15 have one or more credit cards which is less than Canada where nearly 82% of the people of the age of 15 have a credit card but much more than Mexico only around 9% of the population has a credit card but the future of credit cards has never been more uncertain as there are new sorts of identification methods and mobile payment options and these new options will probably lead to advantages and vulnerabilities and probably new regulations to deal with those but in the last 150 years credit his Cheng's used to be something only available to the super-wealthy and now something available to well pretty much all of us and that does allow us the opportunity to buy things we might not have purchased before it's changed our entire understanding of cash and credit and purchasing and borrowing but it also means that some of us are borrowing more than we can pay back according to the Federal Reserve about 60% of Americans with credit cards can affair afford to pay off the balance each month but that means about 40% carry revolving credit which often goes at a high interest rate and the average American household carries around sixty three hundred dollars in credit card debt and no matter what the future of credit cards you can assume that credit is still going to be around in some form as it has been since the beginning of human society I hope you enjoyed this episode of the history guy short snippets a forgotten history between 10 and 15 minutes long and if you did enjoy please go ahead and click that thumbs up button if you have any questions or comments or suggestions for future episodes please write those in the comment section I will be happy to personally respond be sure to follow the history guy on Facebook Instagram Twitter and check out our merchandise on teespring com and if you'd like more episodes on forgotten history all you need to do you subscribe [Music]

Channel: The History Guy: History Deserves to Be Remembered

Views: 263,712

Keywords: history, the history guy, credit cards, black friday, economic history, us history, history guy

Id: vhopzm6L7n8

Length: 12min 29sec (749 seconds)

Published: Fri Nov 29 2019