People born after 1980 may find it hard to believe, but credit cards were not always ubiquitous.
Sure credit has existed for many decades.
But not the buy-anything-anywhere-anytime variety familiar to us today.
As far back as the late 1800s, consumers and merchants exchanged goods through the concept of credit, using credit coins and charge plates as currency.
It wasn’t until about half a century ago that plastic payments as we know them today became a way of life.
It wasn’t until the late 1950s that Bank of America introduced the BankAmericard, the first general purpose credit card which was the forerunner of the plastic payments as we know them today.
99% Invisible gave the fascinating history:
The Fresno Drop
In September 1958, Bank of America began an experiment—one that would have far reaching effects on our lives and on the economy.
After careful consideration, they decided to conduct this experiment in Fresno, California.
The presumption was that no one was paying much attention to Fresno, so if the plan failed, it wouldn’t get a lot of media attention.
Bank of America sent out 60,000 pieces of mail to people in Fresno.
Inside was a little plastic object that has become in equal parts emblematic of opportunity, convenience, and debt.
It was a card offering a $500 line of credit.
Before credit cards, corner bars and other local businesses allowed patrons to keep open tabs, using ledger books to record amounts owed.
Some stores assigned account numbers to customers, or even gave them “charge tokens,” or single-shop credit cards.
For bigger purchases at stores not offering in-house credit, consumers had to get individual loans to buy expensive things like large appliances.
In 1949, a New York businessman named Frank X. McNamara came up with an idea for a single charge card that could be accepted at multiple establishments.
He called it the Diners Club card, and with it, you could make charges at a number of New York restaurants and hotels, but its circulation was relatively limited.
Ten years later, Bank of America came along with a bigger plan.
Within 10 months of what became known as the “Fresno Drop,” more than a million Bank Americards had been mailed out across California.
The novel system was relatively unregulated initially, but eventually the Truth in Lending Act made it illegal to mail out credit cards to people who had never asked for one.
The BankAmericard system eventually became known as Visa.
Other cards that had competed with Bank of America also consolidated and they became MasterCard.
While credit cards have made things much more convenient for many people, they have also arguably encouraged spending in unsustainable ways.
Whether this represents a successful design remains an open question.
Credit Cards in Australia
Back in the early 1970’s those Australians who knew about credit cards were keen to get hold of some and enjoy their many advantages.
Several banks were just as keen, seeing the benefits of making credit available to their customers in this way and stimulating the use of bank services.
But the relatively small population of Australia, coupled with its vast geographical spread made a credit card system cost prohibitive for any single Australian bank.
This is not a problem today; computer and telecommunication technologies have made enormous leaps, and distance is no longer a tyrant.
But in 1972, the cost of a national data net was simply not viable for any one bank.
So in the early 1970s a number of banks combined to seek approval from the Reserve Bank of Australia and the Australian Federal Treasury to commence a credit card scheme in the Australian financial market.
Approval was granted in 1972.
The banks formed a company, Charge Card Services Limited, to manage Bankcard and process credit card transactions.
Each member bank issued its own variant of the Bankcard card and each established its own credit rules and maintained direct customer relations with its own cardholders.
Bankcard was officially launched in October 1974 by then Prime Minister of Australia, Gough Whitlam.
A significant marketing campaign followed the card’s launch.
This included what was then the biggest direct mail marketing campaign in Australia to date.
Among other things, banks posted a card with a A$300 credit limit to potential clients, following analysis of their accounts.
In 1974, David Jones became the first major retailing organisation to accept Bankcard and by 1976 the card was accepted by almost every Australian department chain.
Within 18 months of the card’s issue, there were more than one million cardholders, representing more than 6% of the Australian population.
In 1986 there was a dispute between the banks as to whether Bankcard would be included in the then new electronic banking EFTPOS system.
At the time, Westpac and the Commonwealth Bank were heavily promoting MasterCard and providing only minimal support to the Bankcards they issued, while the National Australia Bank, ANZ and state banks all supported Bankcard.
The Bankcard Scheme was closed on 20 April 2007.