History of Payments: Charge it!

Last week, we looked at two great movements in the history of payments: “Let’s Trade” and “Cash Is King.” Cash had a lengthy reign, indeed, lasting from about 630 B.C. to the mid-20th century. But credit and online payments took the lead in rapid succession before the century was done. Let’s look at credit today, and we’ll conclude our series with “Click” next week.

After World War II, consumers embraced the automobile and took to the roads. The freedom of travel for business and pleasure drove a desire for a payment tool that was safer and more convenient than carrying large quantities of cash. Oil companies began issuing “charge cards” which travelers could use to pay for fuel, repairs and lodging. The convenience and value of the cash-free card became apparent to many other merchants as well. Soon large retail chains and hotels were offering their own charge cards. In 1950 the first universal payment card, the Diners Club Card, was introduced. American Express, Bank of America and MasterCard soon followed with their own charge cards.

Credit cards had a life-style altering impact on consumer payments. Purchases of need or simply of want could be made without the requirement of ready cash. Credit cards were also safer for the consumer since the card company largely took on the responsibility for any fraudulent charges. The well-known downside of credit cards was the increase in consumer debt.

For retailers credit cards also had a fundamental impact. Rules were developed to standardize credit card processing, which reduced fraud and misuse of cards. As time went on the speed (“swiping” we call it today) of the credit card transaction improved as well.