Thank you Mike Jones of Tucson AZ for an interesting story on the history of the credit card. I try not to use these anymore unless I am going to be able to pay in full at the end of the month.
~ MasterCard Stock Hits 52 Week High August 3, 2011 ~
Okay. You need a smile, and I'm here to help out. Credit on demand was the stock market winner today, keeping the market from having its longest losing streak since 1978.
Do you know how Credit Cards came to be? I have a Bank of America story for you...
The year was 1958. Bank of America wanted to get into the credit card business.
Diners Club, the very first credit card, was established in NYC in 1950 by a man named Frank McNamara. It was accepted at its outset by just 14 restaurants in New York, but within two years, companies had begun to realize the power of credit on demand, and Diners Club had grown dramatically in usage. Some 400 restaurants and about 200 car rental agencies now accepted payment by credit card.
McNamara believed that credit cards were a fad that would fade over time, and when he was offered $200,000 for his share of the business, he sold out. (His heirs would like to turn him over in his grave.)
But I digress. A man named Joe Williams was a Bank of America employee in California in 1958, and Joe had an idea. Bank of America would corner the west coast market for credit cards by giving one, unsolicited, to every person in in the fine town of Fresno, California.
Bank of America mailed out 60,000 credit cards. (This was before people had credit scores.) The fine print on the credit cards, each of which had a credit limit of $300, made the cardholder liable for all charges to the card, including fraudulent charges. The bank couldn't lose.
If big is good, bigger must be better, yes? Within 18 months, Joe Williams and his bosses expanded the credit card "drop" program dramatically, and 2,000,000 cards were sent, unsolicited, to citizens of California.
Unfortunately for BofA, 20% of the cards immediately went delinquent. "Hey," people thought, "free money!" The bank was ill prepared to deal with delinquency on accounts where nothing could be repossessed. They were even less prepared to deal with credit card fraud.
Bank of America lost nearly nine million dollars on its credit card launch, and Joe Williams was looking for employment elsewhere. (See? I told you I would make you smile!)
Bank of America recovered, but don't you wonder whatever happened to the BankAmericard? Bank of America changed the name to VISA in 1976.
Today, we Americans have more than six hundred million credit cards in our pockets, wallets and purses. Credit on demand wasn't a fad, and a card is swiped somewhere in the world ten thousand times each and every second!
I just thought you might like to know... :)
I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender
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