The History of the Credit Card

Though the idea of credit has existed since ancient times, the history of modern credit card processing has grown rapidly since its inception in the late 19th century. Like the credit card processing industry itself, the history of credit and debit cards is a bit confusing and littered with competition.

At this point, it is hard to imagine a world without credit cards. Our culture is so dependent on the quick and convenient nature of the credit card processing industry that “card only” restaurants and retail shops are popping up across the country. But the industry as we know it today is relatively young.

Though the idea of credit has existed since ancient times, the history of modern credit card processing has grown rapidly since its inception in the late 19th century. Like the credit card processing industry itself, the history of credit and debit cards is a bit confusing and littered with competition.

Timeline of the Modern Credit Card

1865: Early signs of credit “cards”

The first charge coins were issued, kickstarting modern credit card history. These coins allowed

customers to pay at the time of the purchase without cash. These were tremendously popular in the farming industry during westward expansion as they allowed farmers to wait until after their harvest to pay their bills.

1882–1891: American Express enters the game

American Express—originally formed in 1850 to rival the U.S. Postal Service—threwtheir hat in the credit game by introducing both money orders and travelers’ checks. Both gained popularity in the late 19th century.

1914: Department stores seek loyalty

Department stores and oil companies began offering proprietary cards to customers that allowed them to buy goods on credit. These predecessors to the modern store cards were much more about securing customer loyalty than offering purchasing convenience.

These cards—and all cards like them until the 1970s—required a long and tedious manual credit card transaction. The sales clerk would take the customer’s card and manually copy down the information before running the card through a credit card imprinter to create a carbon copy. The customer then signed to form which the sales clerk would mail to the bank.

The Farrington Addressograph, an early card imprint machine.

Phones made this transaction process slightly more automated, but busy signals often kept customers waiting for long periods before the sales clerk could contact their bank to complete a transaction. As a result, most retailers reserved phone transactions for larger transactions.

1946: First credit card...kind of

John Biggins, a banker from Brooklyn, introduced the Charg-It card. The card worked on a local, closed-loop system, with all of the purchases being routed through Biggins’ bank. The bank paid for the purchase and the customer paid for it through their account at Biggins’ bank at a later time. Five years later, Franklin’s National Bank offered a similar card.

1950: First major credit card...for leisure purposes

The Diners’ Club card was launched after business executive Frank McNamara forgot his wallet during a client lunch. The cardboard card could be used for dining, entertainment, and travel expenses. Though it is considered the first widespread credit card, the Diners’ Club card operated like a charge card—at the end of each month the bill had to be paid in full. The Diners’ Club card was also the first card to charge interest payments to its users. Within a year of its introduction, Diners’ Club cardholders numbered more than 20,000 individuals.

1955: The first time the term “credit card” is used in a patent

The patent ushered in the first gas pump that accepted credit cards.

1958: “T&E” gets some competition

Diners’ Club may have beaten them to the punch, but American Express released their travel and entertainment card geared toward business people who traveled for work. This allowed them to pay for all their business expenses without carrying around large sums of cash.

1958: Bank cards enter the industry

BankAmericard kickstarted the practice of banks offering cards working on revolving credit when they sent out 60,000 unsolicited cards in the mail in California. The introduction of revolving credit made the early iterations into what we know as credit cards today. Customers could carry their remaining monthly balances forward for a fee. By 1966, the card became the first licenced general-purpose credit card.

1959: Credit cards go plastic

American Express launches the first plastic card made out of PVC, greatly increasing the company’s popularity.

1966: MasterCharge (modern-day MasterCard) plants its roots

A Farrington ARCO Manual Credit Card Imprinting Machine, circa 1960s.

The Interbank Card Association was formed to stop BankAmericard from monopolizing the industry. The group sought to create the first national credit card system. They issued their own card, the MasterCharge.

1968: Going global

The Interbank Card Association introduced credit card systems to Mexico, Europe, and Japan, making it the first global card company. This shift also ushered in a new name for the company: MasterCard.

1969: Get your money now!

Chemical Bank in New York installed the first ATM in the U.S., giving cardholders access to cash for the first time.

1970: Competition and magnetic stripes

BankAmericard created its own association called National BankAmericard Inc. to keep up with MasterCard. 1970 also marked the first legal dispute in the credit card industry when a small bank in Arkansas sued National BankAmericard for not offering the new MasterCard. The lawsuit introduced the idea of “duality” into the credit card system—meaning associations could issue credit cards from multiple card brands leading to an increase in consumer choice.

Also in 1970, IBM introduced the magnetic stripe in conjunction with American Airlines and American Express. This form of data transfer has prevailed for nearly 50 years, but is now being phased out to make way for EMV chips and contactless payment methods.

1973: Technologies advance

MasterCard and National BankAmericard developed their own electronic authorization systems for credit card processing. These systems led the way to the technologically advanced industry we know today.

1976: Wait, what’s BankAmericard?

BankAmericard expanded outside the United States and changed its name to Visa, which is now the most widely recognized credit card brand.

1981: Start swiping to earn points

American Airlines offered the first frequent flyer rewards program through a credit card.

Additionally, Hawaiian company Verifone developed its first point-of-sale (POS) machine followed by its popular ZON terminal in 1983. Their machine ushers in widespread use of POS systems across the country.

A Verifone ZON Jr Plus card reader, circa 1980s.

1986: Discover throws its hat in the ring

At Super Bowl XX, Sears launched its own all-purpose credit card called the Discover Card. Though a late-comer to the industry when compared to MasterCard, American Express, and Visa, the Discover Card quickly gained national popularity and solidified itself as a fourth major card brand.

2002: Cards get mini

Though not widely used today, the early 2000s brought about several interesting innovations to credit cards, most notably mini keychain credit cards. Mastercard’s SideCard and the Discover2Go card both aimed to eliminate the wallet from America’s pockets, but ultimately failed.

2007: Cards get personal and a little more futuristic

Capital One pioneered the first personalized credit cards, allowing customers to choose the image on the front of the card. Most companies followed suit. MasterCard and Visa also launched interactive cards with LED screens.

2008: Buyouts

Card industry little brother Discover acquired the famed Diners’ Club International in an effort to increase market share (and consolidate the number of card brands).

2014: Cards go digital

Apple introduced its originally unpopular mobile payment digital wallet, Apple Pay. Similar mobile and contactless payment options expanded throughout the 2010s, including Google Pay, Android Pay, Samsung Pay, and others.

2015: Goodbye stripe, hello chip

Europay, Mastercard, and Visa partnered to create the EMV chip which has become standard practice in the credit card processing industry. Chips offer greater security due to their single use transaction codes.

What’s next?

Credit cards began as a practical solution for farmers to purchase goods before their harvest and have since become the primary payment method of our day. These cards allow individuals to make purchases anytime and nearly anywhere. Of course, these capabilities are only being further expanded today, with online applications like PayPal, Zelle, and Venmo that allow users to pay and receive funds with just a few taps.

The future of credit card processing is growing and shifting as we speak. With Apple Pay—and similar technologies—we are already moving away from the physical card. New technological advancements are pointing us in the direction of biotechnology that will allow for DNA, fingerprints, or even implanted chips to act in the place of credit cards as we know them.

What the future holds in anyone’s guess, but merchants who stay on top of industry trends are guaranteed to have a leg up on the competition as payment methods evolve.

Looking to improve your payments setup? SwipeSum helps businesses of all sizes find their perfect payment processing solution at the lowest possible rate. Best of all? It’s totally free! Click here to get started!

Stephen Seaman

Stephen Seaman

Stephen is the co-founder and COO of Swipesum. A resident of St. Louis since 2014, Stephen loves local microbreweries and ping pong.

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