Financial Literacy - Credit savvy
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The evolution of credit cards

People born after 1980 may find it hard to believe that credit cards were not always ubiquitous.

Credit has existed for many decades, but not the buy-anything-anywhere-anytime variety familiar to us today.

The history of credit cards begins in the farming communities of the early 20th century. Bankrate takes you on a journey from that era to the present day.

Credit cards revolutionized payment processes. Here's how.
The life story of credit cards
  1. The old general store.
  2. Diners Club.
  3. Emergence of Visa, Mastercard.
  4. Banking deregulation begins.
  5. Profitability in the 1980s.
  6. Rewards a big hit.
  7. Credit card reforms.
  8. The future of credit cards.

The old general store

You've seen this in literature or movies depicting the agrarian society of about a hundred years ago. In rural areas, the proprietor of the local general store would extend credit to regular customers, and department stores in the cities would do the same.

"When we were more of a farming nation, we were driven by credit. Every sort of general store in the more rural regions extended credit to farmers and others as a cost of doing business," says Lewis Mandell, Kermit O. Hanson visiting professor of finance and business economics at the Foster School of Business, University of Washington. "In those days, credit was sort of a generalized, open-book credit."

The merchant would just record in his ledger the amount the customer owed, he explains. "The more farming-oriented a society was, the more dependent they were on consumer credit."

As urbanization grew, department stores made credit available to more middle-income customers, and it became necessary to implement a different method to track customer accounts. The first credit cards were simply made of cardboard or paper. Sometime in the 1920s, embossed metal plates like those of Army dog tags were introduced.


"They could actually run these through a little roller and get a copy of the customer's card," Manning says.

The cards were generally associated with only one vendor, for instance, Macy's or Bloomingdales. The world had to wait until 1949 for the first universal card to be introduced: Diners Club.

Diners Club

The Diners Club card evolved from a simple idea: that it would be nice to have a substitute for cash or a checkbook that could be used at more than one place.

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