Tuesday, 15 April 2014

The Origins of the Credit Card

Another Origin Story: The Humble Credit Card
We’ve all got them, nearly 95% of store accept them, we pay bills with them, and we're all in debt with them.

But do you know the history of the humble credit card?

In the 1950s department stores throughout America began to offer steady regular customers a line of credit, by giving them plastic cards, or what became known as “charge plates”. With these ‘plates’ you could secure your purchase now, take it home, and pay later in installments.

The promotional gimmick was successful, very, very successful. It became so successful in such a short period of time that small business merchants began to worry about not being able to compete with this credit system, because almost immediately people began to spend more money at the chain department stores than with them because they didn’t have to pay straight away.

The solution came from the Franklin National Bank in Franklin Square, New York. It created for their customers a special bank ‘credit card’ that could be used in all the stores in their immediate area.

Bank customers who signed up for their cards, could charge their purchase to the card, the bank would pay for the purchase, and then the customers would pay the bank at the end of the month. The idea really took off.

Soon, larger banks were jumping on the bandwagon, and copying the idea. Bank of America developed the very first bank card to be accepted across America in all sorts of consumer stores. They mailed in 1959 (the first year) 60,000 cards, called: “Bank America Cards”.

Customers had the option of paying off the balance in full each month, OR, paying 1.5% of the balance in interest after 25 days. This new installment plan quickly became much more popular than taking out loans from the bank.

In fact, people use their credit cards to not only pay their monthly bills, but they have been used to fund movies, build houses, and more.

So how does this relate to advertising, marketing and promoting your business?

Very little.

But: Credit cards are useful to pay your business bills, and also help you keep track in an itemized way of what is going out. Something that every business should consider if you don't have an accountant working full time for you. Tracking those outgoings can sometimes creep up on you, and, at tax time, can lead to big problems.

Not that you should be taking accounting advice from me, but a client highlighted this to me the other day, and I thought it was well worth sharing with you.

Until next time, keep on selling! Earl Pilkington.