In 2024, 81% of Americans had a credit card, according to the Federal Reserve. And, according to Experian, Americans carry about three to four credit cards. Now, as your resident credit cards expert, I actually have seven, but we’re not talking about me today (thankfully).
Today we’re talking about how credit cards first came about. From metal dog-tag style plates to simply waving your plastic card over a payment terminal, credit cards have certainly evolved in the nearly 100 years they’ve been a concept.
[Read: Best Credit Cards.]
The Concept of Credit Cards
You might be surprised to learn the concept of paying with credit dates as far back as ancient Mesopotamia. Located in today’s Middle East, the region was home to so many different kinds of people, a convenient way to buy goods was necessary. There was no exchange rate back then.
So, clay tablets and inscribed shells were the first IOUs.
You may be wondering how ancient lenders incentivized getting paid back. While we can’t say for certain what every group of peoples employed, it is written in the Babylonian Code of Hammurabi that you were allowed to put your wife or child up as collateral to your lender. So … that’s one option.
Thankfully, the only collateral you need to put up now is a security deposit and a little interest.
First Retail Credit Cards
The precursors to the credit cards of today were introduced in the 1950s, but the history of consumer credit arrangements dates back much further.
In the early 1900s, major department stores such as Macy’s and Wanamaker’s issued paper or brass tokens to their best customers, says Lendol Calder, history professor at Augustana College. Customers could present the token to a clerk, walk out of the store with an item, and make the payment by the end of the month.
Wealthier customers often preferred not to use cash for purchases, Calder says. “The credit operation grew out of that service mentality,” he says.
In 1929, one-third of retail sales were financed. Credit constituted about half of total sales for stores that offered it, according to Bob Hunt, senior vice president and associate director of the Consumer Finance Institute at the Philadelphia Federal Reserve, in his working paper “A Century of Consumer Credit Reporting in America.” Oil companies and hotel chains also made credit arrangements for customers.
“Before credit cards, there was retailer and merchant credit,” Hunt says. “This was a bilateral relationship between buyer and seller. The merchant carried and financed the loan and bore the credit risk. The merchant incurred the cost of collections and record-keeping.”
[Read: Best Store Credit Cards.]
How Credit Cards Went National
The national credit card market we’re used to today — including payment processors such as Visa and Mastercard and bank cards that can be used just about anywhere — has its roots in the late 1950s.
Bank of America’s 1958 launch of its BankAmericard® credit card was legendary. The California bank decided that the best way to introduce its product was to send mass mailings of the card to anyone who did business with the bank in a variety of cities.
According to Joe Nocera in his book “A Piece of the Action: How the Middle Class Joined the Money Class,” Bank of America put about 2 million cards into circulation and 20,000 merchants signed up, but the launch cost the bank millions of dollars in fraud. Delinquencies, which occurred in about 22% of accounts, were also well above expectations.
“It was the Wild West in the early going,” Calder says. “It was so bad that legislation was passed at a national level to prevent credit card companies from issuing credit cards for someone who hadn’t asked for one.”
More banks became interested in credit cards in the 1960s, including some that licensed the BankAmericard name. Mass mailings continued until the practice was outlawed in 1970.
“Meanwhile, customers had to be convinced it was a good idea to buy with a credit card instead of cash,” he says. “Attitudes toward debt had changed quite a bit since the early 20th century, but there was still lagging suspicion, especially about a universal credit card.”
But progress continued, and in 1966 a group of banks started the Interbank Card Association, which eventually became Mastercard. Four years later, the banks that had licensed BankAmericard created what eventually became Visa.
“Most credit card lenders issued cards to consumers in relatively small geographies,” Hunt says. “The march to a concentrated national market of credit card issuers occurred over a 30-year period beginning in the 1970s.”
Federal laws such as the Fair Credit Billing Act and the Truth in Lending Act essentially set nearly uniform rules about credit cards, which made it easier to create a national product, Hunt says. Also, a 1978 Supreme Court decision allowed banks to charge interest rates based on the state where the bank was located, not the rate in the customer’s home state.
“That’s important because the curious thing about credit cards is that banks figured out consumers don’t really care about interest rates,” Calder says. “You could charge just about whatever you want, and the consumer wouldn’t really notice.”
[Read: Best Rewards Credit Cards.]
Exponential Credit Card Growth
Credit card issuers found that they could make money not just on fees charged to merchants. Customers who didn’t pay off their debts right away could also be a great source of revenue.
“They’re going to make their money off people who hold a revolving balance and pay interest — that’s what banks figured out in the 1980s,” Calder says.
Some of the growth in credit cards can be attributed to the widening income gap that started in the early 1970s and continues today, Calder says. Middle-class families could thrive on one income in the 1960s, but that was no longer the case in the 1970s.
“Now there is a consumer need for increased access to credit,” Calder says. “The credit card had a huge advantage over previous versions of credit like installment credit, and people flocked to it.”
Retail-based cards such as those from major department stores were the most commonly held credit cards in the early 1970s. Bank-issued cards exploded in popularity in the decades to come. Only 16% of U.S. families held a bank card in 1970, but more than two-thirds did in 1998, according to the Federal Reserve’s Surveys of Consumer Finances.
While card issuers couldn’t mail consumers credit cards without asking after 1970, they still aggressively marketed their cards. These marketing pitches often trumpeted changes that made credit cards more attractive in a competitive market, including travel rewards and services, retailer discounts, cash back programs, low introductory rates, and low- or no-fee balance transfers.
The Future of Credit Cards
The credit card market has leveled off recently for a few reasons, Hunt says, including market saturation and concern about debt, especially the growth in student loans. “The credit card market has not grown much in the last 10 years,” he says.
Consumers have more options, too. For example, buy now, pay later services like Affirm, Klarna and more offer consumers who have limited access to credit the opportunity to borrow. And credit cards have noticed.
Major issuers now offer BNPL-style products like Chase Pay Over Time, American Express Plan It and Citi Flex Pay. This shows credit card issuers don’t plan to be replaced anytime soon. By adapting to changing environments and customers needs, credit cards may stay part of our financial lives for another 95 years.
More from U.S. News
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When Were Credit Cards Invented? A Timeline of Credit Cards From the 1930s to Now originally appeared on usnews.com
Update 09/17/25: This story was previously published at an earlier date and has been updated with new information.
