The Adventures of the Credit Card

By | June 17, 2015

Credit Card Management
Once upon a time, in a land far far away, a lot of fairy tales occurred. Surely none of the princes and witches had met the credit card. Here’s the tale of the credit card from a land not so far away.

The concept of credit

Let us start with late 1800s – when the consumers and merchants exchanged goods for transactions and had begun the concept of ‘credit’. They used credit coins and charge plates as currencies to conduct transactions.

But the concept of credit cards or plastic money came into being only about a half a century ago. The term ‘credit card’ was first mentioned in Edward Bellamy’s Utopian novel, ‘Looking Backwards’. Apparently, Bellamy mentioned credit cards 11 times in his novel although nothing even remotely close to a credit card existed back then.

Predecessors to the modern credit card in USA

In 1921, Western Union issued charge cards for their regular customers. These charge cards were printed on paper stock cards. By 1938, many companies started accepting each other’s cards. In the 1940s, oil companies accepted these cards from car owners in exchange of fuel consumption and other oil-based products.

Have you ever seen a charge plate? Well, they say it was the actual predecessor to the modern day credit card. It was used in the U.S from 1930s to 1950s. In 1934, the Air Transport Association and American Airlines presented the U.S citizens with an Air Travel Card. With this card, the passengers could first purchase the tickets and pay up later. The passengers even received a 15% discount on any airline ticket from accepting airlines. Soon all domestic airlines in the US started offering Air Travel Cards. By October 1948, the Air Travel Card became internationally accepted among the members of the IATA.

Birth of the credit card

To consolidate multiple cards, Frank McNamara and Ralph Schneider, founders of Diners Club, expanded on the concept of customers paying different merchants using the same card. In 1958, American Express created a Worldwide Credit Card network. In September of the same year, the BankAmeriCard from BOA became the first to be recognised as the first modern credit card as we know it. In 1977, this card changed its name to Visa. MasterCard was born in 1966.

Birth of credit cards in India

The Andhra Bank was the first to introduce credit card in 1981. However, this did not gather much steam as the idea of credit and using it instead of bank notes did not really appeal to the public then. One of the reasons for this could be that Indians were sceptical about the innovation as they were used to traditional banking methods already.

However, in the early 1990s, with the rise in the population of the Indian middle class and increased migration to urban cities, credit cards were welcomed with open arms. Banks like HSBC, Citibank and Standard Chartered made India their home and lured the local public into subscribing their credit cards. It was only in 2000s that loyalty offers on credit cards started. Suddenly, people had four-five credit cards along with other plastic cards; club memberships, hotels and even dining discounts.

Ironically a decade before this, holding so many plastic money cards was frowned upon. And the fear of losing money due to misuse or fraud was huge. There was a huge stigma about owing money to the banks.

But, as we can see, that is old news. Reports say that, as of October 2014, there are 2 crore credit card users in India. The total value of the transactions conducted was INR 1.73 million via POS and ATMs. Banks such as ICICI bank and HDFC Bank have the most number of issued credit cards, followed by Axis Bank, Citi and Standard Chartered.

The above figures and the boom of the ecommerce industry look promising.

Credit Cards have become a big part of our daily lives. We’re sure a princess or two would need no prince if they had got one in the land far far away.

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