The coin redemption machines in the grocery stores
and the vending machines set up for one, five and
ten dollar bills make a strong statement:
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We are still a long way from the Cashless
Society.
That said, it is the rare person these days
in the US that does not have some kind of
non cash means to make a purchase. Whether
one of the many credit cards available, or
the increasingly popular branded Debit Cards,
more and more and more people are using 'Plastic'
for at least some of their purchases.
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The reasons, of course, are
many.
Convenience:
Not having a pocket stuffed with dollar bills in
order to make sure you have enough for lunch and
the grocery store is enough for many people. Whether
credit or debit cards, the man or woman on the street
has access to funds without an overweight wallet.
Credit:
In the case of the true credit cards, the man or
woman on the street has access to more funds than
they actually have in the bank. This is a two edged
sword.
On one hand, it makes handling emergencies and unexpected
expenses easier. The little 'Mini Loan' to tide
you over until the storm has passed.
On the other hand, you tend to make purchases now
that you will have trouble paying for later.
Accountability:
With the credit card comes the credit card statement,
which tallies and tabulates your monthly purchases.
This can be a big help, especially to business people
who need to keep track of expenses.
So, where did it all begin:
Although they are called 'Plastic', some of the
earlier experiments in credit cards were actually
metal. In the years following World War II, some
urban department stores got together and created
an integrated system to handle their on account
retail sales. A customer was given a metal tab,
similar to the 'Dog Tag' used in the military.
The tab was embossed with the customer's name and
address. Little notches were cut out of the edges
that represented the stores that carried the customer's
account. Each store had an imprinting machine with
pins that corresponded to the notch for that store.
If the metal tab fit the machine, then you had an
account with that store.
The true credit card, however,
was introduced in the US much earlier.
In the 1920's, the automobile was all the rage.
People were taking to the roads in ever increasing
numbers. And along the way, the now familiar service
stations sprang up like weeds.
As road traffic increased, and the trips grew longer,
the market saw a need.
Travelers needed gasoline to
continue their trips.
The market filled that need, and the Oil Company
Credit Card was born. It served two purposes.
One, it allowed the weary traveler to fill their
tank without depleting their pocket cash.
Two, since the card was only good at affiliated
service stations, it helped insure brand loyalty.
As the popularity of these
cards grew, so did their acceptance. Motels, diners
and truck stops began to take advantage of these
cards to increase their own business.
In 1950, a company called the Diner's Club took
this idea to the next level with the first 'Universal
Credit Card'.
The Oil Company Cards were limited to service stations
and businesses that catered to the automobile traveler.
The universal card was designed to be used in a
wider variety of retail situations.
It was a huge success, especially
for the business traveler. They were able to fly
into a strange city and be able to put their hotel
room and meals 'On The Card'.
Imitation is the sincerest
form of flattery, and the Diner's Club was not alone
for long. In 1958, American Express appeared. Like
the Diner's club, it was a universal card, but it
also wanted to international. Soon, the American
Express Card was a standard equipment for the cross
country and international traveler.
In addition to the basic card services, American
Express provided secured traveler's checks, mail
and message exchange services, and even legal aid
for their members. This was particularly useful
in a foreign country where finding a sympathetic
person who speaks your language can be a wonderful
thing.
Though very successful, the American Express card
had one limitation. Though you could purchase anything
from a pocket radio to a ticket to Peru, the money
advanced had to be paid back in full during the
next business cycle, usually 30 to 60 days. Not
a problem for business people with expense accounts,
but something of a problem for the average retail
shopper.
Enter the Bank Card.
Taking their queue from the original Oil Company
Cards, the Bank Card allowed the customer to secure
small loans of money which could be paid back over
time. Over time, and with interest. Now, if you
needed a new water heater or had to fly to Boston
for your sister's wedding, you could make the purchase
even if you couldn't pay it back right away.
The Bank of America was the
first entry into this new market in 1959. Their
popular BankAmericard still exists to day under
the VISA brand name.
Soon to follow was the MasterCharge, now called
MasterCard.
Many other cards, like Novus
and Discover, followed with varying levels of success.
Each trying to carve a niche in the retail sales
market.
In the late 1970's, the ATM
was born. This was a marvelous machine that allowed
a person to get cash from their bank accounts when
the bank was closed. By inserting a credit card
sized card into the ATM, and pressing the magic
buttons, money came out. (Assuming your account
had money to begin with.)
This was great, but it too
had a limitation. Just because you had a thousand
dollars in the bank didn't mean you could get all
of it in one pass.
It didn't take long for the
market to figure this out, and the Debit Card came
to pass. Usually branded with one of the major credit
cards, it allowed you to tap into your bank account
for retail purchases. The convenience of a credit
card without the temptation of racking up a big
debt.
This idea gave rise to still
another, the loaded credit card. Like a gift certificate,
you could buy a credit card and load money onto
it as you needed. This had the advantage of limiting
your liability if the card was stolen. It also allowed
businesses to provide cards to employees with a
very specific spending limit.
Today, the credit card market
is more crowded than ever, and the competition more
fierce. Each company is offering more and more incentives
to get your business.
The Discover card pioneered the 'Cash Back' promotion,
offering to share a percentage of their profits
with the customers based on their purchases. Now,
almost every credit card has a rebate incentive
plan. Some are keyed to specific types of purchases,
like gasoline, and others cash.
Individual retailers, particularly
the larger chains, found that they could get into
the act with branded credit cards. By offering special
discounts if you use the Chain Brand Master Card
or Visa for your purchases, the cycle begun by the
oil companies has come full circle.
Whether it's the classic
American Express card, or the latest in designer
Master Cards, few people these days can afford to
leave home without them.
