By now, all that’s left of Christmas is the credit card bill. If you charged a lot of gifts this year, you are not alone. Americans owe a total of $1.7 trillion on their credit cards, with an average of $6,380 owed by each consumer, but in Indiana we have the 4th lowest amount of credit card debt with an average credit card balance of $5,381.
The average interest on all this debt is 23.37%. Read on to see how credit cards came about.
Credit purchases have been around for a long time, but it was through store accounts that were paid off monthly. No banks offered loans or credit cards for everyday or large ticket purchases. Instead, the store would allow consumers to sign for their purchases and pay their tab at the end of the month.
Photo: Smithsonian Institute
In 1949, Frank McNamara was embarrassed because he forgot his wallet when he and his wife went out to dinner. McNamara turned the unfortunate incident into the first independent credit card that allowed restaurant guests to settle their bills monthly instead of paying cash. Restaurants paid a small percentage for offering diners the convenience of using the card. Within a year, the cardboard Diners Club Card was being carried by 42,000 people.
By the end of the ’50s, Americans were ready for the next phase of “buy now, pay later,” with the BankAmericard from the Bank of America, the first general purpose credit card. The new card went a step further than the Diners Club by letting consumers carry their balances over to the next month as long as they made a minimum payment to cover interest. The Bank of American surprised residents of Fresno California in September 1958 by dropping 60,000 cards in the mail. The recipients didn’t apply, they just opened the mailbox and there it was, a card with a $500 credit limit. The bank assumed that people would pay their loans on time, but they were wrong and they lost millions of dollars after mailing another 20 million cards.
The bank survived the initial loses and gained millions of users from coast to coast until they changed the name of the card to VISA.
Credit cards were only being issued to men. Even married women were only given credit cards in their husband’s name and single women needed male co-signer. In 1971 that was changed with a Supreme Court ruling that said that the practice was unconstitutional and in 1974, congress passed Equal Credit Opportunity Act which said that people couldn’t be denied credit based on gender, religion, or race.
In the 75 years since the first introduction of the Diners Club card until now, we have moved to an almost totally cash-free society. Think about that the next time someone tells you that they don’t accept cash.
