Several thousand years ago, the Babylonians would give credit by using clay tablets for barter transactions. A commodity and quantity would be marked, and the tablet could be redeemed for a couple of cows for example. The Romans further developed the art of borrowing and lending, and by the time of the Middle Ages the concept of credit had come to include bills of exchange issued by banks. From the 17th to 19th centuries, English tallymen sold goods on an instalment plan, notching the transactions on a stick, or “tally.”
The first credit cards began appearing in Europe around the 1880s, and in the United States by the 1920s. Early credit cards were charge cards, allowing users to delay payment for a time (usually one month), after which the balance had to be paid (as opposed to modern credit cards which can carry balances month to month). These were cards issued by individual merchants—mainly shops—to their customers.
It was in 1950 when the first credit cards came out that were usable at a number of locations. Frank McNamara, head of the Hamilton Credit Corporation, was having dinner in New York with his lawyer and a friend. When it came time to pay for the meal, McNamara was embarrassed to discover that he had no cash. Later, the three men formed the Diners’ Club—200 customers were issued cards that worked in 27 restaurants. These first credit cards were made of paper; the restaurants had to pay 7 percent for each transaction, and customers paid a three-dollar annual fee.
Within two years, the Diners’ Club cards had caught on enough for McNamara to sell his interest to his partners for about $200,000. Five years later saw the advent of American Express and Visa, so perhaps this was not one of the greatest of business decisions, as credit cards are now a multi billion dollar business.