Before plastic credit cards were invented, the concept of credit was around for centuries. With today’s modern society and technological advancements, credit cards have come a long way.
How Did the Credit Card Start?
Credit cards got their start way before you were born. In fact, they got their start before the internet, planes, automobiles, trains, and the lightbulb. They go back before the French Revolution, and Benjamin Franklin discovered the power of lightning. They even go back before the age of Victorian England, the printing press, and Shakespeare. So just when did this credit system start?
The Early Beginnings of Credit
Historic records provide evidence of a written credit system that goes back to the ancient Code of Hammurabi. Named after the ruler of Ancient Babylon from 1792 to 1750 B.C., this code provided an example of a written credit system. There were rules for lending and paying back a loan with interest. There were even rules for how interest rate worked. According to the code, a loan served as a financial agreement between one borrower and one creditor or merchant.
The Rise of Credit Cards
In the early days of the “Wild West,” owners of general goods stores often extended a line of credit to their customers who were farmers and cattle ranchers. Because these men only got paid after the harvest or when their herd sold at the market, the store owners allowed them to purchase on credit and pay their bill when profits came in.
Fast forward to the 1900s and the rise in travel, commerce, and an economic boom. Larger hotels and department stores started issuing paper cards to valued customers they could trust to pay them back. By 1950, Diners Club launched its first general merchandise charge card. They were issued to well-off customers and used it for travel and entertainment expenses. This credit card system created by Ralph Schneider and Frank McNamara required customers to pay off the balance each month in full, creating our modern-day credit card system.
In 1958, Bank of America launched its general credit card called the BankAmericard. It came with a whopping $300 credit limit and was the first of its kind of offer revolving credit, giving people the option to carry over a balance.
Credit Cards and Modern Technology
By the 1980s, cards transitioned from paper to plastic with a magnetic stripe on the back. This strip allowed the credit reading to be taken by special computer equipment. In the 1990s, they continued to evolve and were soon embedded with computer chips called EMV smart chips. These chips allowed for encrypted, two-way authentication between the merchant’s credit card terminal and a payment processing network.
What is the Future of Credit Cards?
With the history of credit solidly in place, let’s turn our attention to the question of their role in the future economy. What will be their place? Will there be some other form of credit option, or are the plastic cards in our wallets here to stay?
These days, everything we purchase from the grocery store to the movie theater is likely bought with a credit or debit card, or alternative mobile wallet, cash-sharing app, or cryptocurrency. There are plenty of alternative ways to pay for your purchases these days, including:
PayPal Credit: PayPal has a line of credit in addition to providing a platform to pay directly.
Cryptocurrency: The most well-known currency is Bitcoin, but there are others, including Litecoin and Ethereum.
Prepaid Cards: These function like debit cards but preloaded with cash.
Mobile Wallets: The most popular options are Apple Pay and Google Wallet. These link directly to your bank accounts, debit or credit cards, allowing you to access all financial resources without a card physically present.
More Security Features
Fraud prevention is one of the top concerns when it comes to credit and debit cards. As technology evolves, features are added to increase security and protect the purchaser. However, the security system in place is far from complete. In the future, you can expect credit card companies to incorporate AI to detect and fight fraud.
Artificial Intelligence in Credit Cards
AI technology is exploding in its applications, uses, and intelligence. Expect that AI will soon be employed to detect and fight fraud, in addition to providing customer-focused services. Credit AI will likely resemble something close to Amazon’s Alexa and manage payments, identify spending patterns and trends, make suggestions for purchases, and remind you about upcoming payments.
Contactless Payments Through Smart Phones
Numerous banks are rapidly adding features to their apps that allow their customers to control credit and debit cards through their app. Consumers currently can lock their cards, control spending limits, report lost cards, and alert the company to potential fraud the minute it happens. Eventually, the use of smartphone apps for credit and debit cards could go the same way as Apple Pay or Google Wallet and become a completely contactless form of payment with no physical card required.
Will Plastic Credit Cards Disappear?
Technology is rapidly evolving, and both consumers and merchants alike are focusing more attention and energy into online, app, and contactless payment. However, with the advent of Google Wallet, PayPal, Square, and CashApp, major credit cards have received another platform to conduct business. Far from hurting credit card companies, apps, and online methods have made it easier to gain customers and provide credit to people in nearly any situation. Major credit card companies such as MasterCard, Visa, and American Express have all come up with a mobile payment platform for their customers.
Though consumers might start paying in varying ways beyond using the physical credit card, they’ll still be using credit extended to them by the companies that issue cards.
Credit cards have come a long way from being tied to a single merchant. Today, credit is extended from major companies to people of all ages and economic status. The future possibilities of credit cards are endless.