Business

The Evolution of Credit Cards

Credit cards are used universally to make purchases, whether in a store, by phone, or online. However, it was only about a century ago that the precursors to our modern credit cards were introduced.

Early Days

From the early 1920s to the World War II era, credit cards were issued by oil companies and some stores for the convenience of their customers. You could only use these cards to purchase products from the issuer. These cards were made of paper or cardboard, though later, metal cards became available.

Diners Club

Introduced in 1950, the Diners Club card was used mostly by travelers and business people to cover the costs of travel and entertainment. It was the first card that could be used in a variety of different places. A few years later, American Express also issued a version. Their cards were made of plastic. Payment in full was required each month.

By the mid-1960s, Mastercard and BankAmericard (which became Visa) were introduced. The latter allowed a revolving balance, which meant users could carry debt from month to month. These were the first general-purpose credit cards as they could be used for any type of purchase, not just those associated with entertainment or travel.

At this time, manual devices were used to get an imprint of the cards and paper receipts were generated, often using carbon paper. This could be messy and was not as secure.

Electronic Processing

While customers still got paper receipts, electronic processing allowed sellers to check a buyer’s credit information so that the merchant might ensure the customer had enough credit to make the purchase. This increased the number of retailers that would accept credit cards. Magnetic strips for credit cards were introduced in 1970 by American Express for airline cards and became more universally available in 1980.

Introduction of Additional Features

With the advent of the Discover card, additional features that appealed to customers were added. Discover was the first company to have a credit card that charged no annual fee and had a cash rewards program.

Microchips

To enhance security, credit cards with embedded microchips were introduced in Europe during the 1990s. More recently, this technology began to be used in the United States.

Smartphones and Other Features

Nowadays, users can link their credit cards to their smartphones and credit cards are increasingly secure. Most cards still support magnetic strips as well as having chips, and most also have three-digit security codes as well as a signature.

Another innovation that is becoming popular is buying bitcoin with a credit card, as well as some other cryptocurrencies. However, according to SoFi Invest experts, “Users who want to buy crypto with a credit card should be warned that doing so will likely be more expensive, complicated, and risky than using other payment methods.” Users who wish to do this must be aware that not all exchanges allow credit card transactions and that many financial institutions consider crypto purchases to be cash advances. Given these factors, buying cryptocurrencies with credit cards may not be an attractive option right now, but given how quickly credit card-related innovations have caught on in the past, it is only a matter of time before this process becomes more convenient.

Other novel developments that will probably catch on in the future include things like dynamic CVV codes, which would make it harder for criminals, and frictionless payment systems.

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