The History of Credit Card Processing in America


Payment cards can be dated back to the early 1900s. In 1914, which seemed to be only a goodwill gesture towards customer service, Western Union gave some of its preferred (preferred) customers a metal card to use to defer payments – interest-free services used. A source said the card was known as "Metal Money".

Over time, the payment card did the same. Until the beginning of the Second World War, department stores, communications companies, transport and delivery companies and oil companies had extended this service to their favorite customers. These corporate-based payment cards were limited by their exclusive use through the issuing company. These companies issued the cards, processed the transactions and recovered the debts of the customer.

During the Second World War, the use of credit cards and payment cards was prohibited.

After the Second World War, credit cards became more accessible to the general public After seeing patterns of increased travel and spending among cardholders, banks became interested in credit cards – after all , they were in the area of ​​potential profit lending behind attaching an interest to the cards.

When banks entered the credit card business, they only issued cards to local consumers. In 1951, the Franklin National Bank in New York issued the "Charge It" card. This allowed customers to bill purchases at local stores. This payment card system worked a lot like credit card systems work today. The consumer made a purchase with the card. the merchant has made a network credit authorization and has finalized the sale. The bank would reimburse the retailer and collect the consumer's debt at a later date. Other banks across the country have been impressed by the success of this process. Several years after the Charge It card, they offered their customers similar services for purchases at local retail outlets.

In the 1950s, the first payment card was developed. It allowed consumers to charge for services and products at various points of sale. This innovation was the payment card of the Diner & # 39; s Club, created for businessmen and intended to cover travel and entertainment expenses. The hotel club card has given its members a 60-day payment period.

The first revolving credit card was issued in the state of California by Bank of America. The card, BankAmericard, has been marketed throughout the state. This card marks a new stage in the development of the credit card industry. BankAmericard was the first card to offer cardholders payment options. Payment options such as current cards allow consumers to pay the entire debt or make minimum monthly payments, while banks charge interest on the remaining balances.

From the 1960s, credit card associations began to emerge. In 1965, Bank of America signed licensing agreements with other banks, large and small, throughout the country. These licensing agreements allowed the regional banks to issue BankAmericards and exchange trades through issuing banks.

By 1969, most independent bank payment cards had been converted to BankAmericard or Master Charge cards.

Finally, the issue and processing of payment cards has become too burdensome for the banking sector. This is what has led to the emergence of credit card associations such as the Interlink Association, the Western States Bank Card Association and the National Bank. Current associations include Visa and Master Card.

The following major changes in the credit card business involved streamlining transaction processing and reducing credit card fraud. In the early 1970s, electronic authorizations allowed the retail establishment to obtain approval for credit card transactions 24 hours a day.

In the mid-1970s, the credit card industry began exploring international waters, but had some difficulties because of the name association; "America" ​​in BankAmericard, for example. This led to renaming BankAmericard into Visa and Master Charge, changing its name to Master Card.

In 1979, electronic processing was improving. Electronic numbering terminals and magnetic tapes on the back of the credit cards enabled retailers to slip the customer's credit card into the dial-up terminal, which provided access to the credit card holder's information. This process gave the authorizations and settlements processed in a minute or two. An added benefit was the reduction of paper.

In the early 1980s, the first automated teller machines (ATMs) were opened, allowing consumers to access cash and make deposits 24 hours a day in our country and in other countries. Credit card holders can access cash in different currencies.

Since its inception, Visa has been a leader in credit card innovation. For this reason, they have become the world's leading association of credit cards with more than one billion cards issued and more than 50% of all credit card transactions worldwide.

"Visa (International)" is a "non-profit" organization of more than 40,000 members, and MasterCard is a for-profit company that issues credit cards and sets and maintains rules for the acceptance and the processing of credit cards. members who are mostly senior executives of their member banks and heavyweights of the industry. "

There are five leaders in the credit card business: Visa International, MasterCard, American Express, Discover and Diner's Club. There are others who try to enter the sector, such as check processing companies, Euro Card, JCB and ATMs, but credit cards still account for over 90% of all transactions e-commerce!

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