Credit cards were not invented on a blank sheet of paper. They gradually evolved out of the payment card industry and through the growth of consumer credit.
The immediate predecessor of the credit card was the revolving line of consumer credit. This was a line of credit that many middle class families, particularly those with a salary, or an unstable, sales based income, could buy goods and pay for them later. These lines of credit often interest being charged.
At the same time charge cards were being developed. These cards were not credit cards as we know them now as they were either supported by a bank account or they had to be settled in full when the monthly bill arrived. The first charge card that went beyond a single store was the Diners Club card that was used in New York restaurants, but later spread to restaurants throughout the word. The first Diners Club charge card was made of cardboard.
American Express soon took the idea. American Express had always been an innovator in financial services, and had invented the first travellers’ cheque. The payment card was a natural extension of their existing travellers’ cheque network and American Express started to be accepted in hotels, restaurants and garages around the world which had previously accepted travellers’ cheques.
Marrying the payment card with the revolving line of credit was tried by a number of banks. The first bank to do this successfully was Bank of America in California. They decided to launch their product in Fresno, California where they had a very high market share already. They launched the card by mailing a large cross section of their Fresno customers with a pre-approved credit card. This quickly took off and soon became the Visa card.
The predecessor of the Mastercard was also started in California as competition for Bank of America. This was the first card co-operative (a model Visa would follow) as the constituent banks realised that none of them were big enough to successfully have a credit card on their own.
With almost everyone having at least one credit card in their wallets it is often surprising for people to realise this kind of plastic is still relatively young.
In fact, credit cards were first introduced in Australia in 1974 by Bankcard, making this form of credit just 37 years old.
Prior to their introduction, credit cards were something only a few Australians were familiar with, specifically those who had travelled to America.
Within 18 months of Bankcard and the Commonwealth Bank launching credit cards there were 1,054,000 Australian cardholders and 49,000 merchants accepting credit across the country.
The trend towards credit and other card payment methods has climbed higher and higher into the millions of cards that now sit in our purses and wallets.
Bankcard itself was closed down in 2006 as competition between the local-only brand and internationally accepted brands like MasterCard and Visa came to a head.
At the time, a spokesperson for Bankcard said that while the brand had set Australia off on a path towards cashless payments, the market had become far more sophisticated over time and Bankcard had lost its appeal.
This sophistication also marked a change in the way that credit card provider’s operated, foreshadowing the rise in competitive features such as balance transfers, low rates, no annual fees and rewards programs.
These days credit cards are much easier to use, swap or cancel, making it even more important for providers to come up with features that will keep cardholder’s happy.
But the sacrifice for this financial convenience has come in the form of debt, with the Reserve Bank of Australia reporting the total owed at over $49.3 billion, or over $3000 per credit card earlier this year.
While credit may now be an ingrained part of everyday life, the wrong kind of card often leads to the kind of debt seen above, making it incredibly important to compare different options.
Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. Ever popular with no annual fee first year, low purchase rate and 0% balance transfer. Have a look also at the 0% balance transfer HSBC offer with no balance transfer fee, plus an annual fee waiver each year you meet a spend criteria.