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In 1949 one New York businessman, Frank McNamara, went to pay his restaurant bill after entertaining clients only to find he had left his wallet in another suit. From this potentially embarrassing situation (his wife was able to cover the bill) he came up with the idea of a Diners Club who issued their first cards to approx 200 customers in the USA who could use their new facility in selected restaurants in New York.


However, this was technically a charge card as the customer had to pay the entire amount as soon as billed by Diners Club. In 1959 Bank of America began issuing its own card in California which was the first widely available credit card accepted by a substantial merchant base. At the same time American Express issued their first credit cards for travel and entertainment charges which was accepted at participating restaurants, hotels and airlines.


In 1966 the Bank of America began forming licensing agreements with other banks enabling them to issue credit cards on a widespread basis and was promoted, particularly to traveling salesmen, as a time-saving device rather than a form of credit as instant access to their own banking facilities was difficult when not in their own area.


In the same year 14 US banks formed the first banking association named Interlink, with the ability to exchange information on credit card transactions and the following year four Californian banks did the same in order to compete with the Bank America card, renamed Visa in 1976, who introduced the MasterCharge programme, renamed MasterCard in 1979. Thereafter banks wishing to issue credit cards joined either the Visa or MasterCard Association whose members shared costs, making access to the programme available to smaller financial institutions.


Barclays Bank was the first bank outside the USA to issue its own Barclaycard credit card in 1966 but it wasn't until the magnetic strip was introduced in 1970 that the credit card entered the technological era. Under this system, invented by IBM, a magnetic strip capable of storing data on a band of magnetic material on the reverse of the card is swiped through a magnetic reader. This system proved reasonably effective cutting down on both paperwork and fraud but still had a number of security problems.


To solve this, banks are replacing this system with the current technology of 'smartcards' or 'Chip & PIN' which contain an embedded microchip and can only be authenticated by using a Personal Identification No (PIN). In the UK it is common for merchants to refer to their terminals which can read credit cards as PDQ machines. This has arisen as Barclays Merchant Services (BMS), who were one of the first banks to introduce credit card machines in the UK, referred to their terminals as PDQ's and people got to associate the initials PDQ with credit card machines, just as vacuum cleaners came to be known as Hoovers after the company who pioneered the vacuum cleaner.


Merchants must apply to a bank for the facility to accept credit cards as a form of payment via a credit card machine or over the internet. Most banks now offer mobile and portable terminals, commonly used by restauranteurs.


Having reached very high usage levels in the USA, UK and Canada, take-up of credit cards was much slower in many other developed countries of the world with many European countries not having anything near the penetration levels of the USA & UK until the mid to late 1990's. Today, however, there are countless variations on the basic concept of revolving credit including branded credit cards, store cards, commercial cards, etc and with the continually developing technology we can only wait and see how the market will evolve in the coming years.



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