Today they are ubiquitous, but there was a time when they did not exist. Credit card have been around for quite some time, but they have existed for much longer than many think. For this reason, in the following article we will deal with the history of a tool that has become essential in modern life.
The origin of credit cards
Normally, the first card is usually referred to as the one that Diners Club took out. Its founder, Frank X. McNamara, went to dinner at a restaurant where, curiously, they were talking about a client who was having problems making his payments. But she realized that she had forgotten to bring enough money to pay the bill.
Seeing that it was a very embarrassing situation, he founded the company Diners Club (the club of those who go to dinner). At first it was intended to be used as a means of payment in restaurants, for which Mr. McNamara had to convince many of them to accept his card.
Although McNamara’s story is well known, the truth is that the credit card was not his invention. According to a working paper from the Philadelphia Federal Reserve, credit cards began to be issued in the first decade of the 20th century. They were initially issued by gas station companies and department stores, but were not very successful as they could only be used in specific geographical areas and establishments.
The credit card as we know it today
Although there were attempts to launch universal credit cards, these did not appear until later. In 1958, BankAmericard (now known as VISA) and the Interbank Card Association (now known as MasterCard) were created. The modern credit card was born.
American Express launched its first credit card in 1958, at first they were paper, but the following year they began to be issued in plastic. These systems differed in that the payment was processed in a centralized way, so that open systems could be created.
In Spain, for example, they were introduced from the 1960s, although in the United States they had already been circulating for a few years. It took longer for them to be generalized, which we can date back to the 1980s. Currently, more than 70% of the population uses them and their number is growing. It is also common to have more than one.
The future of the credit card
Credit and debit cards are currently being renewed. Little by little, the use of the magnetic stripe has been abandoned in favor of chips, which are much safer. Even more so is the standardization of RFID technology, which allows contactless payment. This form of payment allows you to make purchases by bringing the card close to the POS terminal, without inserting it into the reader or passing it through the magnetic stripe reader.
Likewise, new Internet payment systems alternative to credit cards have also emerged, such as Nimble.
Credit Card Legislation
Between the explosion in the number of credit cards issued by banks and the increase in the debt of Americans on their cards, the sector was open to abuse. Banks were free to charge interest as they saw fit and impose late fees for whatever amount they wanted, creating difficulties for consumers. Laws were enacted to help curb punitive behavior by credit card companies and offer protection to cardholders.
Truth in Lending Act (1968)
The passage of the Truth in Lending Act (TILA) in 1968 enacted protections for consumers against unfair billing practices. The law applies to all loans, not just credit cards. Under this law, banks must disclose loan rates and fees so consumers can compare. TILA also gives someone the right to back out of a loan within three days. However, it does not set limits or guidelines on how much interest a lender can charge or whether a bank has to approve a loan.
Fair Credit Billing Act (1974)
The Fair Credit Billing Act (FCBA) was passed in 1974 and amended the TILA in several fundamental respects. The law applies only to open credit accounts, such as checking accounts, credit cards and home equity loans, and was designed to protect consumers from unfair billing practices.
The FCBA allows qualified loan borrowers to dispute any charges they believe to be incorrect, such as unauthorized charges, goods or services that were not delivered, or charges for incorrect amounts.
Fair Debt Collection Practices Act (1977)
The Fair Debt Collection Practices Act of 1977 protects consumers from being harassed by third-party debt collectors. This includes harassing, threatening, or inappropriate contact with someone who owes money. In particular, this only applies to third-party debt collectors, which lenders often turn to after trying and failing to collect a debt on their own.
Credit Card Disclosure and Accountability Act of 2009
The Credit Card Accountability and Disclosure Act of 2009, or the CARD Act as it is more commonly known, added more consumer protections to the Truth in Lending Act. These include rules on how often and by how much a lender can raise interest rates on a loan and an end to the practice of marketing credit cards to young people on college campuses, including access Limited to accounts for those under the age of 21 without a co-signer.