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History of Credit Cards, Credit Card Processing and Merchant Accounts
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Merchant Services History
The earliest form of the bankcard was "Charg-It", a system of credit developed by John Biggins in 1946 which allowed customers to charge their local retail purchases. The merchant then deposited the charges at Biggins' bank, and the bank reimbursed the merchant for the sale and collected payment from the customer. This system helped introduce the first bank credit card, which was circulated by Franklin National Bank in Long Island, New York in 1951. Once an application was submitted for credit worthiness a card was issued. Merchants copied information from the card onto a sales slip and called for an approval for each transaction over a specified limit. The bank would then credit the merchants account for the sale minus a discount to cover the cost for providing the loan.
By 1959, many financial institutions had begun credit programs. Simultaneously card issuers were offering the added services of revolving credit. This gave the cardholder the choice to either pay off their balance or maintain a balance and pay a finance charge.
In 1960, Bank of America, introduced its own bankcard, called BankAmericard, and began licensing regional financial institutions to act as the BankAmericard bank for their region. BankAmericard is now what we know currently as Visa.
Other banks began looking for other ways to compete, in 1966, 14 banks formed Interbank, a new association with the ability to exchange information on credit card transactions.
The following year, four California banks opened its memberships to other financial institutions in the Western U.S. (Western States Bankcard Association). The product was known as MasterCharge. They have purchased the right to use this name from First National Bank of Louisville (currently known as National City Bank of Kentucky).
The WSBA licensed Interbank to use the MasterCharge name and Logo. In the late 1960’s, numerous financial institutions became MasterCharge members to compete with BankAmericard. |
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