Boomers Watched the World of Credit Evolve

Credit cards are so much a part of our daily lives, it’s hard to believe they haven’t always been around. In fact, most baby boomers can recall a time in their early youth that their parents did not have credit cards of any kind.

There is mention of some form of credit card dating back to the late 1800s in Europe, but the first ones that began to appear in the U.S. were issued in the 1920s by oil companies and hotels. These cards were more like promissory notes than what we know as a credit card today in that they could only be used at the one business that issued the card, and the bill was due in full each month.

Department stores like Sears also jumped on the bandwagon with their own credit systems, but in each case the card was accepted only at their stores, and any balance would have to be paid in full when the bill came due.

The first bank card was similar. Issued in 1946 — the first year of the Baby Boom — by the Flatbush National Bank in Brooklyn, New York, its “Charg-It” system required both the local merchant and the purchaser to have accounts at the bank, so all monthly transactions occurred within the one bank.

Diners Club issued the first nationally accepted card in 1950 for a select number of mostly higher-end restaurants. Member restaurants would be paid by Diners Club, then restaurant-goers who chose to pay with a Diners Club card would pay Diners Club rather than the restaurant. Their monthly bill would have to be paid in full.

American Express decided to enter the fray in 1958, though it offered more flexibility in where and for what type of purchase the card could be used. Like the cards that preceded it, theirs was only accepted by member companies, and the bill was due in full each month.

In 1959, Diners Club introduced revolving credit, where the consumer no longer had to pay the bill in full each month. Instead, a partial payment could be made, and a finance charge was applied on the remaining balance.

By the 1960s, the Baby Boom was winding down and the use of credit cards was increasing, especially by companies with traveling salesmen. Bank of America formed a company in 1966 that would change the closed system that had existed for credit, allowing each member bank in their system to issue their own credit cards. Its biggest innovation, however, was that now transactions could be between banks anywhere, so consumers could use their BankAmerica cards (later known as Visa) at any member company, anywhere in the world. A rival company was also formed in 1966, called the InterBank Association. Member banks issued MasterCharge cards (today known as MasterCard) to serve the same purpose as the BankAmerica cards at any merchant that accepted it.

As time went on, banks became members of both card issuing systems, so transactions could occur and funds could be transferred between banks anywhere. For these reasons, Congress began regulating the cards and the banks’ consumer policies in the 1970s.

The Discover card made its debut during the Super Bowl in 1986, American Express allowed paying over time in 1987, and the industry has been constantly evolving since.

Mister Boomer’s aunt had worked in the credit department of a Sears store in her area for many years, but even though he knew some neighborhood adults had a Sears charge, his parents did not. Years later his parents adopted the department store card concept with gusto, acquiring cards from Sears, Montgomery Ward and others.

Mister Boomer remembers getting his first credit card at the age of 18. It was a Visa card, issued by his neighborhood bank. His father thought it would be a good idea for him to establish his credit early. Mister B kept it mainly for emergency purposes, and not even in his wallet for the first couple of years. Like most boomers, a $10 or $20 bill hidden in a wallet compartment was all that would be necessary in an emergency. After college he added a MasterCharge card, but still only used the cards for large purchases such as airline tickets, tires or car repairs.

Mister Boomer’s introduction to the world of credit happened when he was less than 10 years old. It was the beginning of the 1960s, so national bank cards weren’t yet available. The family was purchasing their first washer and dryer, so Mister B went along for the ride when his father drove to the local Good Housekeeping store. Posted in the window, and again inside the store, were hand-painted paper signs that read, “90 days, same as cash.” Mister B was curious about the phrase, and asked his father what it meant. He told him that he would only do business with a company that offered this, because it meant he had 90 days — three months — to come up with the money. The “same as cash” meant there was no extra charge, as long as the bill was paid within the three month period. It was, in an era when a handshake was enough assurance that a bill would be paid, a credit card-like transaction without the need for a credit card — or bank. This “free” credit meant the family could get its first taste of modern appliances. Up to that point, the family washer had a hand wringer and the “dryer” was a backyard clothesline.

How were you introduced into the world of credit, boomers? Do you remember a time when your parents didn’t have any credit cards?