While the credit cards we know today are either plastic or digitally displayed on our phones, the concept of credit actually dates back to the 1950s, long before they were for general use. The first credit card was created by the Diners Club in 1950 and was initially intended for use at restaurants. This card was made out of cardboard and didn’t have revolving credit. But it wasn’t until 1959, that Diners Club, American Express, and BankAmericard, became the first credit card providers to offer plastic credit cards to customers. From there, the credit card went through many different stages to get where it is today and became an essential tool for everyday transactions. This allows people to make purchases without carrying cash and provides a convenient way to build credit and earn rewards. Today, credit cards are widely accepted around the world and have become an integral part of modern financial systems. Now to understand how we progressed from plastic cards to modern-day credit cards, we must first examine the history of credit cards:
The Earliest Types of Credit Cards
As a society, we are accustomed to using PVC, also known as plastic, credit cards, or paying with our phones. Credit cards, however, were not always made of plastic; in fact, in 1918, Western Union issued metal plates that allowed customers to defer payments on purchases they made. Fast forward to 1949, when Frank McNamara, founder of the Diners Club, made a credit card out of cardboard that customers could use like a charge card and pay the bill in full every month. He was inspired to create a credit card after he went to a restaurant and forgot his wallet at home. And, of course, he created this credit card solely to pay restaurant bills without carrying cash. This card gained popularity and had more than ten thousand customers in its first year of operation.
The First Bank Credit Cards
Although many credit cards were developed, there weren’t any issued by banks until 1946, when John Briggs, from the Flatbush National Bank of Brooklyn, became the first to offer charge cards called Charge-It cards. This card allowed customers to go within a 2-block radius and purchase from multiple vendors before going to the bank. Then, in 1958, Bank of America issued the first credit card for general use, called the BankAmericard. American Express then revolutionized the credit card and made the first plastic credit card, which BankAmericard quickly followed. The card came with a $300 limit and was the first revolving credit, allowing people to carry a balance and can be used at any establishment. Customers could use the revolving credit to pay down their balances in monthly installments rather than paying the entire balance as they would with a Charge-It or Diners Club card. BankAmericard merged with National BankAmericard, Inc. in 1970, and six years later, it became Visa. Today, Visa continues to be a leader in the credit card industry, offering a wide range of products and services to consumers around the world.
Processing Credit Cards Manually
The modern credit card machines that we use daily to pay for purchases have revolutionized the way we handle transactions, and it is hard to imagine life without them. However, in the scheme of things, they haven’t been around for long. Merchants used to manually record transactions until 1960 when the first imprinter was invented. The imprinter allowed merchants to process credit card payments by filling out a form and placing the customer’s credit card into the imprinter, which makes an impression of the card’s information onto a receipt. The cardholder signs the receipt, and the merchant mails it to the issuing bank for payment. Oftentimes, using an imprinter was slow and prone to human error, which made the checkout process inefficient. That is why it was necessary to find a more efficient and reliable system for processing credit card transactions.
Electronic Credit Card Processing
With advancements in technology, the use of electronic payment terminals and online payment gateways has replaced the outdated method of using an imprinter. This has streamlined the payment process and reduced the risk of errors and fraud. It all began when Forest Parry invented the magnetic stripe on a credit card. This magnetic stripe contained all the information necessary to make a transaction: the cardholder’s name, card number, authorization, and expiration date. The technology behind the credit card made transactions more secure and easier for both merchants and consumers. Magnetic stripe cards also paved the way for contactless payment methods like chips and mobile payments, offering even greater convenience and security for transactions. Credit card processing technology has come a long way in the past five decades. Modern POS systems with electronic credit card processors can process credit cards more efficiently and more securely than ever before. Today, a cardholder can swipe, dip or tap their card to initiate a speedy process of authorization and authentication. If a transaction is approved, the customer goes on their way, and the payment information goes to the POS to be sent out for clearing and settlement.
EMV Credit Cards
In the past, the magnetic stripe’s security was low because it was easy to forge a signature and hack the data, giving thieves access to all the cardholder’s data. However, in 1990, with the introduction of EMV (Europay, Mastercard, and Visa) chip technology, the security of credit and debit cards significantly improved, making it much harder for criminals to steal cardholder information. EMV technology has also led to the development of contactless payment methods, such as mobile wallets and wearables, which use the same secure chip technology to process transactions quickly and conveniently. As more merchants adopt EMV technology, consumers can feel more confident that their payment information is being protected.
Emerging Payment Methods
Credit and debit cards will likely dominate the payment landscape for the foreseeable future as they offer convenience, security, and widespread acceptance. However, emerging technologies such as mobile payments have become increasingly popular payment method in recent years. Mobile payments offer even greater convenience, as they eliminate the need to carry physical cards and can be made with just a tap or scan. Additionally, mobile payments can offer enhanced security features such as biometric authentication. In fact, a whopping 29% of consumers already say they would prefer to pay with their smartphones all the time. This growing trend has transformed how we handle transactions and will continue to shape the future of mobile payments.
Accept New Payment Methods for Your Small Business With NRS Pay
Given the evolution of technology and credit card processing, businesses must be ready to accept any form of payment. When you partner with NRS Pay, you can accept credit cards, EMV chip cards, Apple Pay, and Android Pay. We make it easy and affordable for your small business to accept these payment technologies, so you can meet your customers’ needs and grow your business.
