Credit cards emerged from department stores in the early 1900s, not from banks
The first credit cards were not plastic rectangles issued by Visa or Mastercard. They were paper or metal tokens issued by individual stores — department stores, oil companies, and hotels — that let regular customers buy now and pay later. Wanamaker's department store in Philadelphia is often credited with issuing the first store credit card around 1890, though the practice spread slowly. These early cards were straightforward: a customer had an account with one store, received a card or token as proof, and settled the bill monthly or quarterly.
The modern credit card system did not exist until the 1950s. Before then, credit was personal — a store manager knew you, trusted you, and kept a ledger. There was no central network, no interest calculation, and no way to use one card at multiple merchants. Each card worked at one place only.
Key Takeaways
- The first credit cards were issued by individual stores like Wanamaker's department store in the 1890s, not by banks or card networks.
- Diners Club, founded in 1950, created the first card that worked at multiple merchants and introduced the modern charge card model.
- Bank of America launched BankAmericard in 1958, the first card issued by a bank and the direct ancestor of today's Visa.
- Mastercard (originally Interbank Card) launched in 1966 as a competitor to Visa, creating the two-network system still in place today.
- Credit cards evolved from charge cards that required full monthly payment to revolving credit cards that allowed customers to carry a balance and pay interest.
Diners Club: The first multi-merchant card in 1950
Diners Club, founded by Frank McNamara and Ralph Schneider, changed the model entirely. In 1950, they issued the first card that worked at multiple restaurants and merchants, not just one store. The card was made of cardboard at first, then plastic. Cardholders paid an annual fee and received a monthly bill for all purchases — the card was a charge card, meaning you had to pay the full balance each month, not a revolving credit card.
Diners Club proved the concept worked. By 1951, the company had 20,000 cardholders. The card became a status symbol and a practical tool for business travel. Other charge card companies followed: American Express launched in 1958 and quickly became the premium card for business and travel.
Bank of America and the birth of the bank-issued credit card
Bank of America created BankAmericard in 1958 in California. This was the first credit card issued by a bank, not a store or a travel company. More importantly, it was a true revolving credit card — customers could carry a balance from month to month and pay interest on what they owed. This was different from Diners Club, which required full payment monthly.
BankAmericard spread slowly at first. Banks were cautious about consumer credit, and many customers were skeptical of unsecured lending. But the model worked. By the 1960s, BankAmericard had expanded beyond California. In 1976, Bank of America licensed the brand to other banks and renamed it Visa, creating a network that any bank could join.
The shift from charge cards to revolving credit cards was crucial. It meant cardholders could borrow money at interest, and card issuers made money not just from merchant fees but from interest payments. This is the business model that still drives credit cards today.
Mastercard and the two-network system
Mastercard (originally called Interbank Card) launched in 1966 as a direct competitor to BankAmericard. It was created by a group of banks that wanted their own card network, rather than relying on Bank of America's system. Mastercard grew quickly and by the 1970s was nearly as large as Visa.
The competition between Visa and Mastercard shaped the credit card industry. Both networks set standards for how cards worked, how merchants processed payments, and what fees they charged. Both licensed their brands to banks, which issued the actual cards to customers. This three-part system — the network, the issuing bank, and the merchant — is still how credit cards work today.
How credit cards became plastic and digital
Early credit cards were made of paper or thin cardboard. Plastic cards arrived in the 1950s and became standard by the 1960s. The magnetic stripe, which stores card data, was added in the 1960s and made it possible to process transactions quickly without looking up a ledger.
Chip technology arrived in the 1980s and 1990s, making cards harder to counterfeit. Contactless payment — tapping a card instead of swiping — became common in the 2000s. Digital wallets like Apple Pay and Google Pay, which store card data on a phone, emerged in the 2010s. But the underlying system — a network, an issuing bank, and a merchant processor — has remained largely the same since the 1960s.
Why credit cards took decades to spread
Credit cards seem obvious now, but they faced real obstacles. Merchants had to buy equipment to process cards, which was expensive. Customers had to trust that their card information would not be stolen. Banks had to build systems to track millions of accounts and handle fraud. None of this existed before the 1950s.
Regulation also slowed adoption. The Truth in Lending Act of 1968 required card issuers to disclose interest rates and fees clearly. This made cards safer for consumers but added compliance costs for banks. State laws varied on how much interest a card issuer could charge, which made it hard to issue cards nationally.
By the 1980s, most of these obstacles had been solved. Credit cards became the dominant form of consumer credit in the United States. Today, the average American household carries multiple cards and uses them for most purchases.
The difference between charge cards and credit cards
The distinction matters because it explains why American Express, Diners Club, and Visa work differently. American Express and Diners Club are primarily charge cards — you pay a fee to use them, and you are expected to pay the full balance monthly. Visa and Mastercard are credit card networks — the issuing bank decides whether to let you carry a balance and charge interest.
In practice, American Express now offers products that work like credit cards too, with revolving balances and interest. But the original model — charge card versus credit card — came from these different founders and different eras. Charge cards were created by travel and entertainment companies. Credit cards were created by banks.
Frequently Asked Questions
Who invented the credit card?
There is no single inventor. Wanamaker's department store issued the first store credit card around 1890. Diners Club created the first multi-merchant card in 1950. Bank of America issued the first bank credit card in 1958. Each step built on the previous one.
Why did it take so long for credit cards to become common?
Merchants needed equipment to process cards, which was expensive and unreliable. Banks needed systems to track millions of accounts. Customers needed to trust that their information would be safe. Regulation required clear disclosure of interest rates and fees. All of this took time to build and standardize.
Is American Express a credit card?
American Express is primarily a charge card company, meaning cardholders are expected to pay the full balance monthly. However, American Express now offers some products that work like credit cards, with the option to carry a balance and pay interest. The distinction matters for how interest and fees are calculated.
How did Visa and Mastercard become the dominant networks?
Visa (originally BankAmericard) and Mastercard both licensed their brands to banks, which issued the actual cards. This network model meant any bank could issue a Visa or Mastercard, which made them widely available. Other networks like Discover and American Express remained smaller because they issued their own cards directly.
Do credit cards work the same way now as they did in the 1960s?
The basic system is the same: a network, an issuing bank, and a merchant processor. But the technology has changed. Magnetic stripes became chips, which became contactless payment and digital wallets. Interest rates, fees, and rewards programs are now much more complex than they were fifty years ago.