Payment card

The credit card crystallized from the convergence of post-war business travel, telephone networks, and magnetic recording technology. Store charge accounts dated back to the early 1900s—department stores issued metal plates, oil companies distributed credit tokens. But these were closed loops: each merchant was its own creditor.

Three post-war developments made universal credit cards inevitable. Business travel created professionals dining far from home banks. AT&T's telephone network enabled real-time authorization. Mainframe computing made tracking thousands of accounts feasible.

On February 8, 1950, Frank McNamara and Ralph Schneider returned to Major's Cabin Grill in Manhattan and paid with the Diners Club card. The model: charge merchants 7% per transaction, bill cardholders $5 annually, act as trusted intermediary. By year's end, 20,000 members carried the card. McNamara sold his stake in 1952 for $200,000.

Where Diners Club pioneered the charge card (pay monthly), Bank of America invented revolving credit. In September 1958, they mailed 60,000 unsolicited cards to Fresno in the "Fresno Drop"—the first credit card allowing holders to carry balances and pay interest.

In 1960, IBM engineer Forrest Parry solved a deceptively simple problem: affixing magnetic tape to plastic. His wife suggested her flat iron—heat bonded tape to plastic perfectly. IBM established magnetic stripe standards in 1969. Now cards carried machine-readable data: account numbers, expiration dates, enabling electronic terminals.

In 1966, a consortium formed the Interbank Card Association as counterweight to BankAmericard. By 1970, Bank of America ceded control to a cooperative. In 1976, BankAmericard became Visa; in 1979, Master Charge became Mastercard. Both names were chosen for international legibility.

Credit cards laid the foundation for e-commerce. When the internet arrived, card numbers became the bridge between physical banking and digital transactions.