when you go to the checkout line at a grocery store or when it is time to pay the bill after
eating dinner in a restaurant payment is as simple as handing over your credit card to the cashier or
waitress and with a quick swipe or scan your debt is paid and you're on your way you don't even need
to carry physical paper money as that tiny plastic card is connected to your bank account where you
can see your total amounts as well as transactions right at your fingertips on a smartphone
credit cards are extremely common in the united states today in fact about 79 of americans have
one but how did we get here where did the idea of a credit card come from and what led to its
creation the history behind credit cards is actually a long and interesting one that
dates all the way back to the earliest forms of trade in human history as well as the creation
of the concept of credit it's safe to say that credit cards have come a long way and today we
will discover their evolution i'm your host ryan silcash and you're watching it's history
the idea of credit cards makes transactions so much easier and it's hard to imagine
the world without them the first ever recorded use of currency was in 9000 bc
in the early parts of human history far before the creation of paper money at this time currency
took a form of several interesting objects such as cattle camels shells deer skin notes
beads various types of food and many other unusual items but ever since human civilization developed
enough to conceive forms of trading currency there have been systems of credit the concept of
credit is where goods are traded but the seller does not immediately receive payment instead
the debt is recorded and paid at a later date interestingly enough economics based on credit
actually predate paper money as we know it well they did not call it credit bronze age communities
handled transactions in terms of crop yield this system would work in a process where farmers
would pay tax on the number of crops they could grow and essentially promised to hand over that
certain amount these transactions would occur at the beginning of the season though before
the crops had grown so they would actually pay their taxes months later when the harvest had
grown more similar to the structures we have today the first credit system that involved writing down
and recording debt occurred in mesopotamia over 5 000 years ago in what many historians consider
to be the oldest civilization in human history you see in mesopotamia the process of taxation
through expected crop yield was continued but clay tablets were used to record and mark these
transactions for the first time in history this also coincided with some of the earliest use
of written language and humans recording their own history through text systems of credit like the
ones found in mesopotamia and before continued for thousands of years but things would drastically
change around the time of the industrial revolution and the exceptional expansion
of global trade leading to more pronounced and defined modern economic systems in the united
states the first items that resembled credit cards appeared in the 1800s during the era of westward
expansion merchants would often use things called credit coins or charge plates when trading with
farmers the credit coins and charge plates would signify crops to be grown by the end of the season
this way farmers could use their crops to trade or purchase goods before their crops were grown
in the same method that was seen in the bronze age by the turn of the century the financial service
company western union then began giving metal plates to certain customers expanding on the
idea of credit coins and charge plates these small metal plates let customers pay with credit however
they were only offered to specific customers to be used for a few particular transactions meaning
they were not open to the general public these western union metal plates would soon be made
obsolete with the introduction of the charging card conceived by the brooklyn banker john
briggins and was the first closed loop credit card and in some ways this was a risky endeavor as
the charging card used brigan's own bank to back all transactions when someone used this card it
would pay the merchant the money the customer owed for a specific purchase using the bank's own money
then the owner of the charge it card would pay back the bank at a later date well things like
the western union metal plate or brigands charge it card were the early prototypes two credit cards
the first ever credit card was made by the diners club a project started by business partners frank
mcnamara and ralph schneider in 1949. there is actually an interesting story behind this
invention as well some versions of the story differ but the prevailing retelling is that frank
mcnamara went to the mayor's cabinet grill in new york city for dinner when he was finished eating
he eventually realized that he had forgotten his wallet at home so when it was time to pay the bill
and he didn't have any money the restaurant wanted him to go in the back and wash all the dishes
in order to avoid this mcnamara was able to negotiate his way out by signing a paper promising
to come back and pay the next day mcnamara then realized that it would have been so much easier if
he could have just carried around some indicator that promises payment instead of carrying around a
giant wad of cash everywhere he went after sharing this idea with ralph schneider they officially
started the diners club mcnamara and schneider then got many friends and family to participate
in joining the club each member was then given a cardboard card that could be used at 27
restaurants across new york city allowing the club members to pay back their debts at a later date
the diners club was founded with 200 members but the massive popularity of this creative idea saw
it ballooned to 42 000 over the next two years then restaurants across the country also joined in
allowing for even more venues for the diners club to attend obviously a credit card offers
many advantages over paper currency as they can easily fit into your pocket wallet or purse
they are mostly secure and the card itself holds no intrinsic value if lost or stolen
then of course the most appealing benefit is that it allows one to purchase items without
directly paying at the moment which makes daily transactions a lot easier from this point on
credit cards were now introduced into everyday lives of many americans while the diners club
created the first modern credit card the first plastic credit card was created by the credit
card service company american express in 1959 very quickly this trend caught on among other companies
many new credit card companies were created and they all used plastic cards meanwhile the existing
companies also switched over the late 1960s saw massive innovations in the credit card industry
in many different areas in 1966 bank of america released a new card called the bank of america
card which was the first to use revolving credit and it still exists today people who have this
card can use it in every continental state in the united states soon after america card
merged with several regional companies and formed visa the most used payment processor in history
in 1969 credit cards were now fitted with magnetic strips which could be scanned or swiped which
leads us to our next peculiar invention story it was said that forrest perry an ibm engineer
was trying to find a way to attach magnetic strips to a credit card so it could be scanned or swiped
perry kept encountering failure though as none of the different types of glue would stick
so in a fit of frustration perry went home for the day and relayed his annoyances to his wife funny
enough his wife suggested that he iron the strip onto the card the next day perry went to work
and tried this method to his surprise it worked soon after all credit cards would be fitted with
magnetic strips that were ironed on the credit card industry continued to grow in the next few
decades leading to inevitable restrictions and regulations in 1970 the fair credit reporting
act was passed with the goal to protect customers and credit card users from mistreatment this law
forced the companies to be transparent with all their information regarding where their money is
located and where it is heading to as well as the amount for a given account or card then in 1974
president ford signed the equal credit opportunity act this new law prohibited credit card companies
from discriminating based upon race or gender more recently some newer legislation has been passed as
well for example the credit card accountability responsibility and disclosure or card act was
signed by president obama in 2009 this act stops companies from charging excessive and unfair fees
or penalties against customers following the 1960s and 70s credit cards started to become
more and more prevalent among the american populace this would lead to even further
advancements in terms of technological innovation and economic growth for example 1985 was the year
that marked the first ever purchase made with a discovery credit card worth 26.77 at a sears
in atlanta georgia the following year saw some controversy though when the sears corporation
announced their new discovery card at that year's super bowl both mastercard and visa were angered
and they did not allow their banks to issue discovery cards discovery then responded by filing
an anti-trust lawsuit against mastercard and visa the litigation case lasted for years and was
only finally resolved in 2004 when the supreme court chose not to hear the defendant's appeal
allowing banks and card issuers to distribute multiple brands 1996 saw further additions to
the common credit card in europe credit cards with microchips actually started to become
common so that year euro pay mastercard and visa constructed the standard smart chip titled emv
chip and this innovation would be the basis for all upcoming chipped cards overall credit cards
that use chips are much safer than cards that only have unsecured magnetic strips as these magnetic
strips can easily be copied onto fraudulent cards into the new century credit cards would continue
to advance in 2010 barclay and orange debuted the first contactless payment card these new
types of credit cards were even easier to use as all one had to do to complete their transaction
was tap their card against the terminal no swiping or scanning required fast forward to 2014 and we
see a massive technological advancement that overlaps with the other widespread technologies of
the time that year apple unveiled their apple pay for all iphones this allowed customers to store
all their banking information on their phone and even purchase items without a physical credit card
only a year later android pay which is known as google pay was launched and as i'm sure you
might imagine or even know from personal experiences with all of these innovations
came many opportunities for scams and frauds with any growing industry and especially for those that
involve monetary transactions theft and fraud will always be an unfortunate reality credit card fraud
is actually one of the fastest growing types of crimes in the modern world and it is very often
difficult to prevent credit card fraud is usually defined as the attempted use of a credit card or
card number that has been stolen reported lost or cancelled credit card fraud can also connect
with identity theft as it is also a crime to use a credit card number of a card that you don't own
when credit cards started to become more prevalent the first methods of fraud arose with theft of the
actual card or by stealing copies of receipts however these methods died out when credit cards
with electronic processing became the norm in the current day the most common type of credit card
fraud is through the mail service where a person can steal items that are being mailed from these
materials they have access to people's personal information such as your credit card account or
your banking information another form is by advance payment schemes federal regulations
state that a credit card company must credit an account once the payment is received so some have
been able to exploit this by using counterfeit or stolen information to make an advance payment and
then immediately draw the money unfortunately this is typically unnoticed until the next bill arrives
counterfeit credit cards are also a massive issue with the internet allowing criminals to
use simple technology to take a credit card and then duplicate it usually by using the magnetic
strip then there's the issue of the fictitious card where a criminal will create a fake credit
card that's capable of making transactions yet in reality the card doesn't exist and the owner
is not real credit card companies have enacted many policies and preventions in order to deter
such fraud for example embedded microchips credit card verification and holograms but
the increase of transactions over the internet makes defense very difficult especially since
credit cards can be very appealing for this type of misconduct given that the customer themselves
are not usually held liable with often the company being the only one losing money
credit cards have had a long history going from clay tablets all the way up to the
plastic cards that we have today it is often extremely difficult to predict the future but
one might make an educated guess based on the prevailing trends which seem to be leading us
into the next years right now it seems that the technological direction of daily economic
activity is moving towards total dependence on digital banks one suspects that this means
credit cards will become even more essential to everyday transactions but who knows in what
capacity and through what medium in the future one possibility that seems incredibly likely
is that credit cards will no longer even be needed as a literal and physical card virtual cards may
be all that is required to perform a transaction this coincides with society's dependence on
smartphones which seem to be consuming and replacing many other everyday appliances such
as cameras telephones televisions computers books clocks watches flashlights calculators
and many others with the creation of apple pay and google pay we already see this to a certain extent
but in the coming years the idea of a credit card could potentially exist solely on your smartphone
one possibility that may seem more outlandish at the moment however but might also become a reality
are cardless systems based on biometrics you see instead of a card that employs radio frequencies
customers might as well use their fingerprints eye scans or facial recognition there are some
major issues with the concept though for example a person's biometric information is relatively
permanent which causes a problem if your banking information is stolen nowadays if your credit card
is stolen you can easily change your password but it would be very hard to change your fingerprints
or your eyes blood vessels well technology may move past the need for a physical credit card
people's bank accounts as well as the overall system of credit is very likely to stay for
the foreseeable future but still considering what we learned if we turn back to those clay tablets
i can't help but wonder when did predatory lending begin and how did these instruments enable those
practices and if you're wondering the same thing click that subscribe button to let me know if
we should revisit that question in a future video until next time guys i am ryan socash signing off