Credit cards emerged in the 1950s, starting with Diners Club in 1950
The first credit card you could use at multiple merchants was Diners Club, launched in February 1950. It was created by Frank McNamara and Ralph Schneider, who wanted a way to pay for restaurant meals without carrying cash. The card worked at 27 restaurants in New York City at first, and members received a monthly bill for all their charges combined.
Diners Club was not a bank card — the company itself extended the credit, not a financial institution. Members paid an annual fee to join, and the company made money by charging restaurants a percentage of each transaction. This model was different from how credit cards work today, where a bank or credit issuer typically holds the account.
Before Diners Club, some department stores and oil companies issued their own cards, but those worked only at that single company's locations. Diners Club was the first to let you use one card at many different places, which made it genuinely new.
Key Takeaways
- Diners Club, launched in 1950, was the first credit card accepted at multiple merchants rather than just one store or company.
- Bank of America introduced the BankAmericard in 1958, which became Visa and created the modern credit card system where banks issue cards and set terms.
- Mastercard (originally Interbank Card) launched in 1966 and competed directly with Visa for market share among banks and cardholders.
- Credit cards did not become widespread until the 1970s and 1980s, when computers made it possible to process transactions quickly and track balances reliably.
Bank of America created the first bank-issued credit card in 1958
In 1958, Bank of America launched the BankAmericard in California. This was the first credit card issued by a bank rather than a separate company like Diners Club. The bank mailed cards to customers without asking first — a practice that would later be restricted by law because it created fraud risk. Customers could use the card at any merchant who agreed to accept it, and the bank handled the credit and collected payment from the cardholder.
The BankAmericard model became the foundation for modern credit cards. Instead of the card company extending credit directly, a bank issued the card and decided whether to approve purchases and what interest rate to charge. This meant cardholders could carry a balance and pay interest, rather than paying the full bill each month as Diners Club required.
Bank of America eventually licensed the BankAmericard name to other banks, which created a network of cards that worked across the country. In 1976, the BankAmericard was renamed Visa, and it remains the largest credit card network today.
Mastercard entered the market in 1966 as a competitor to Visa
A group of banks formed Interbank Card Association in 1966 to compete with Bank of America's BankAmericard. They issued the Interbank Card, which worked the same way — banks issued the card to their customers, and the cardholder could use it at any merchant in the network. In 1979, Interbank Card was renamed Mastercard.
Mastercard and Visa became the two dominant networks because they solved a problem: a merchant could accept cards from many different banks without having to set up separate relationships with each one. The card networks handled the connections between banks, merchants, and cardholders. This made it practical for stores to accept credit cards, and practical for banks to issue them.
Credit cards stayed rare until computers made them practical in the 1970s
Even though credit cards existed in the 1950s and 1960s, they were not common. Processing a transaction required manual steps — the merchant would write down the card number, the bank would mail a bill to the cardholder, and someone had to track whether the payment arrived. Fraud was hard to catch because there was no when ready way to check if a card was stolen or if the cardholder had hit their credit limit.
The shift came in the 1970s and 1980s, when computers became fast enough to process transactions in seconds and store account information reliably. Merchants could now swipe a card and get approval in real time. Banks could track balances and send accurate bills. Credit card fraud became easier to detect because transactions were recorded when ready.
By the 1980s, credit cards had become a normal way to pay. Visa and Mastercard had thousands of banks issuing their cards, and millions of merchants accepted them. The infrastructure that made credit cards practical — the networks, the computers, the payment processing — was in place.
American Express and Discover added to the market later
American Express began as a travel company in the 1800s and issued its own charge card in 1958, the same year Bank of America launched the BankAmericard. The American Express card required cardholders to pay the full balance each month, like Diners Club, rather than carrying a balance. American Express made money by charging cardholders an annual fee and charging merchants a percentage of each transaction.
Discover Card launched in 1986 as a product of Sears. It was the first major card to offer cash back — a percentage of each purchase returned to the cardholder. Discover built its own network instead of relying on Visa or Mastercard, which meant Discover had to convince merchants to accept it separately.
Today, Visa and Mastercard dominate because they are accepted almost everywhere. American Express and Discover have smaller market share, partly because not all merchants accept them and partly because they charge merchants higher fees.
The shift from magnetic stripe to chip technology happened in the 2010s
For decades, credit cards used a magnetic stripe on the back to store the card number and expiration date. A merchant would swipe the card, and the stripe would be read by a machine. This system was vulnerable to fraud because the data on the stripe could be copied or stolen.
In the 2010s, credit card companies began moving to chip technology (also called EMV, for Europay, Mastercard, and Visa). A chip embedded in the card generates a unique code for each transaction, making it much harder to counterfeit. The United States was slow to adopt chips compared to Europe and other regions, but by 2015 most U.S. merchants had upgraded their payment terminals.
Today, most credit cards have both a chip and a magnetic stripe for backward compatibility. Many merchants now accept contactless payments — you can tap or wave a card near a reader instead of inserting it or swiping. This technology uses the same chip-based security as inserted cards.
Frequently Asked Questions
What was the very first credit card ever made?
Diners Club, launched in 1950, was the first credit card accepted at multiple merchants. Before that, some companies like oil stations and department stores issued their own cards, but you could only use them at that one company. Diners Club let you use one card at many restaurants.
Did credit cards exist before 1950?
Single-company cards existed before 1950 — oil companies and department stores issued them as early as the 1920s. But these cards only worked at that one company's locations. The innovation of Diners Club was that one card worked at many different places.
When did credit cards become common in the United States?
Credit cards were rare in the 1950s and 1960s because processing transactions required manual work. They became common in the 1970s and 1980s, when computers made it possible to approve transactions when ready and track balances accurately. By the 1990s, most households had at least one credit card.
Why do credit cards have an expiration date?
Expiration dates exist partly for security — they force cardholders to request a new card periodically, which gives the bank a chance to issue a new card number if fraud is suspected. They also reflect the physical wear on the card and the magnetic stripe or chip over time.
How did people pay for things before credit cards?
Before credit cards, people paid with cash, checks, or store credit. Store credit meant the merchant kept a record of what you owed and you paid them later — but it only worked at that one store. Credit cards made it possible to borrow from a bank and use that credit anywhere.