The first universal credit card was introduced in America by the Diners Club, Inc. in 1950. Consumers could use the card at a variety of businesses and stores, and then be billed later on a monthly or annual basis. The consumer was charged an annual fee for the privilege. In 1958, the American Express company introduced another major universal card, and declared, “Don’t leave home without it!”
Shortly thereafter, the bank credit-card system came into place. Under this plan, the banks extend credit to the consumer by allowing them to purchase goods and services without cash. The merchants are paid right away by the banks (something they appreciate), and the bank assembles the charges to be billed to the cardholder at the end of the billing period. The banks make their money by charging the cardholder interest for any balance they carry beyond the billing cycle, and in some cases, an annual fee (usually $50-$75 a year) for the privilege of credit. They also make money by charging the merchant a small percent of the transaction (usually 3%).
The first national bank plan was BankAmericard, which was started in California on a statewide basis in 1959 by Bank of America in San Francisco. This system was licensed in other states starting in 1966 and was renamed VISA in 1976. Other major banks followed, including the also well-known MasterCard (formerly called Master Charge).
In 1965, only 5 million cards were in circulation; by 2000, American consumers had nearly 1.4 billion cards (including department store and gas cards), which they used to charge $1.2 trillion in goods and services annually!
In terms of market share, the following is an estimated breakdown by card issuers:
| VISA |
51% |
| MasterCard |
30% |
| American Express |
19% |
| Discover |
5% |
There are about 190 million credit card holders in America, or about 81% of U.S. households have at least one credit card. Most Americans carry five or six payment cards including credit cards, debit cards, and retail cards. About 78% of U.S. households are considered creditworthy.
The average household pays $1,000 a year in interest, which is $83.33 per month. The average household charges about $9,000 to their credit cards.
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