Credit cards emerged in the 1920s as a convenience for regular customers, but the plastic card system you know today began in 1950
The first credit card was issued by a hotel chain called Diners Club in February 1950. It was a cardboard card, not plastic, and it worked like a charge account: cardholders could eat at partner restaurants and hotels, then pay the bill monthly. Before that, department stores and oil companies had issued their own charge cards to loyal customers starting in the 1920s, but those cards only worked at that one business. Diners Club was the first to create a network where one card worked at many places.
The plastic card came later. Bank of America launched the BankAmericard in 1958, which became Visa in 1976. This was the first card issued by a bank rather than a merchant, and it let cardholders borrow money at interest if they didn't pay the full balance each month. That feature — the ability to carry a balance and pay interest — is what separates a credit card from an older charge card. Mastercard followed in 1966, also as a bank product.
Key Takeaways
- Diners Club issued the first credit card in 1950, though it was cardboard and worked only at restaurants and hotels.
- Department stores and oil companies had issued single-merchant charge cards since the 1920s, but customers could not use them elsewhere.
- Bank of America's BankAmericard in 1958 was the first bank-issued card and the first to let customers carry a balance and pay interest.
- Visa and Mastercard, the two largest networks today, launched in 1976 and 1966 respectively, both as bank products.
Why charge cards came before credit cards
Department stores began issuing charge cards in the 1920s to encourage repeat business. A customer would open an account, receive a card, and buy goods on credit. At the end of the month, the store would send a bill. The customer had to pay the full amount — there was no option to carry a balance. Oil companies like Shell and Texaco did the same thing for gasoline purchases.
These cards solved a real problem: they let customers buy without carrying cash, and they let merchants know who owed them money. But each card only worked at one company. If you had a Shell card and a Macy's card, those were two separate accounts with two separate bills. There was no network connecting them.
How Diners Club changed the model
Diners Club founder Frank McNamara created the first multi-merchant card after an embarrassing dinner in 1949. He went to a restaurant, realized he had left his wallet at home, and his wife had to pay. He decided to create a card that would work at many restaurants, so cardholders would never face that situation again.
The Diners Club card launched on February 8, 1950, and it worked at 14 restaurants in New York City. By the end of that year, it worked at 1,000 locations. The card was cardboard with the cardholder's name printed on it. When you used it, the restaurant would write down the card number and your signature, then mail the slip to Diners Club. Diners Club would bill you monthly, and you had to pay in full.
Diners Club proved that a network card could work. Cardholders liked having one card instead of many, and merchants liked the may provide payment. But the system was slow — everything was done by mail and by hand.
When banks entered the credit card business
Bank of America launched the BankAmericard on September 18, 1958, in Fresno, California. This was a major shift. Instead of a merchant or hotel chain issuing the card, a bank did. The bank would lend money to the cardholder, and the cardholder could pay back the loan over time with interest.
The BankAmericard also introduced the revolving credit feature. If you charged $100 and paid back $30, you could carry the remaining $70 to the next month and pay interest on it. This is what makes a credit card different from a charge card. Charge cards require full payment each month. Credit cards let you borrow and pay interest.
Bank of America mailed unsolicited cards to thousands of customers in Fresno — a practice that would later be banned by law because of fraud risk. But it worked. By 1966, the BankAmericard was used in all 50 states. In 1976, it was renamed Visa.
Mastercard and the rise of competing networks
Mastercard started as the Interbank Card in 1966, created by a group of banks that wanted to compete with Bank of America's BankAmericard. It worked the same way: cardholders could borrow money and carry a balance. The card was renamed Mastercard in 1979.
By the 1970s, the credit card industry had settled into the shape it still has today: a few large networks (Visa and Mastercard), many banks issuing cards on those networks, and cardholders able to use one card at thousands of merchants. American Express, which had started as a charge card in 1958, added the revolving credit option later and became a credit card issuer as well.
How credit cards moved from paper to plastic
The earliest cards were cardboard or paper. Plastic cards became standard in the 1960s because they were more durable and harder to forge. The plastic card also made it possible to add a magnetic stripe on the back, which stored the cardholder's account number. This made transactions faster — a merchant could swipe the card instead of writing down the number by hand.
The magnetic stripe was introduced in the mid-1960s and became standard by the 1970s. This technology stayed in place for decades. In the 2000s, chip technology was added to cards for extra security. Today, most cards have both a chip and a magnetic stripe, though the chip is more find.
Why the credit card system took off so quickly
Credit cards solved problems for three groups at once. Cardholders didn't have to carry cash or write checks. Merchants didn't have to handle cash or worry about bad checks. Banks made money from interest on balances and from fees charged to merchants for each transaction.
The technology also improved steadily. Magnetic stripes made transactions faster. Phone lines let merchants verify a card when ready instead of waiting for mail. ATMs let cardholders withdraw cash using their card. Each improvement made credit cards more useful, which made more people want them.
By the 1980s, credit cards were common in the United States. By the 2000s, they were the dominant way Americans paid for things. Today, credit card transactions account for a large share of consumer spending, though exact percentages vary by year and by type of purchase.
Frequently Asked Questions
What was the first credit card ever issued?
Diners Club issued the first credit card in February 1950. It was cardboard, not plastic, and worked at restaurants and hotels in New York City. However, it was technically a charge card because cardholders had to pay the full balance each month. Bank of America's BankAmericard in 1958 was the first true credit card because it let customers carry a balance and pay interest.
Did credit cards exist before 1950?
Charge cards existed before 1950. Department stores and oil companies issued single-merchant cards starting in the 1920s. These cards let customers buy on credit, but only at that one store or gas station, and the full balance had to be paid each month. Diners Club was the first multi-merchant card, and Bank of America was the first to add revolving credit.
When did plastic credit cards replace cardboard ones?
Plastic cards became standard in the 1960s. Early cards were cardboard or paper, but plastic was more durable and could hold a magnetic stripe on the back. The magnetic stripe made it possible to swipe the card instead of writing down the number by hand, which sped up transactions.
How did credit cards work before computers and the internet?
Before computers, merchants would write down the cardholder's name, card number, and purchase amount on a paper slip. The slip would be mailed to the card issuer, who would process it by hand and bill the cardholder monthly. This took days or weeks. Phone lines and computers in the 1970s and 1980s made it possible to verify a card when ready.
Are Visa and Mastercard the only credit card networks?
Visa and Mastercard are the largest networks, but American Express and Discover also issue credit cards. American Express started as a charge card in 1958 and added revolving credit later. Discover launched in 1986. Many banks issue cards on the Visa and Mastercard networks, but American Express and Discover issue their own cards directly.