Tuesday, January 5, 2016

Put It On My Tab

by Connie Cortright

Long gone are the days of using cash to make all your purchases. Today most young people never have cash in their pocket, not even to go get lunch at McDonald's, or so I'm told by my son. Credit cards are used for everything - even a hamburger.

That's a far cry from department stores in the 20s-30s that we heard about last week where all purchases were done with cash. How did things change from one extreme to the other? It was a long slow process that had many twists and turns in it.

Credit card purchases at department stores actually started with charge coins, a metallic round object issued by a specific store. The customer number was embossed on the charge coins along with the store name. The charge coins were attached to key rings for easy use when needed. They were also issued by hotels for frequent users. An imprint of the coin was printed on the sales slip for an easy and fast way to get the account number on the invoice, which prevented error by handwriting the information. These were used by wealthy shoppers to keep a running tab at the store, which was paid up at the end of every month.

By 1928, Charga-Plates, an aluminum rectangle about the size of a dog tag, started to replace the charge coins. These items did contain the name and address of the customers They were sometimes kept at the department store itself and pulled out to use when the customer was purchasing an item. An imprinter was run across the embossed side with an inked ribbon, leaving the customer information on the sales slip. These were always issued by the store and used only in the one location to add the new purchases to the tab of a good paying customer. They were used up until the early 1950s in some stores.

Other companies started using this idea for frequent customers and issued charge cards printed on paper card stock. By 1940s, oil as well as airline companies, started using these for returning customers. However, the customer had to have a different charge card for every company that was used. Ralph Schneider and Frank McNamara founded the Diners Club card in 1950 trying to consolidate the many different cards under one name. Since this was before computer data, all the purchases from these cards had to be made in duplicate and sent to the central office to be processed onto one invoice. These charge cards required every invoice to be paid off in its entirety each month. No balances could be carried over to the next month.

Revolving credit cards, using a third-party bank to fund the balance of the purchases, were not utilized until Bank of America started the BankAmericard in 1958. Years later this card was changed into VISA when other banks joined Bank of America. MasterCard got it's start in 1966 when a different group of banks including Citibank joined together to give competition to BankAmericard. The development of the computer helped to make these credit cards companies into the enormous businesses that they are today.

And the rest is pretty much history... I, for one, am glad that I don't have to carry around cash or checks to purchase groceries, etc anymore. Credit cards are so convenient.

Information taken from Credit Card - Wikipedia

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