Credit cards may be common now, but they were once as new on the scene as Bitcoin. Let’s take a look at the credit card’s journey to mainstream acceptance to see what lessons we can apply to cryptocurrency.
The First National Credit Card
The credit card has many predecessors, such as Western Union’s metal plates from 1914 that allowed you to defer payment, 1928’s dog-tag-like Charga-Plates for in-store use with large merchants, and the bank-issued Charg-It in 1946, which only worked within close proximity to the bank.
But the first card accepted nationally was the cardboard Diners Club Card, created in 1950 as a way to pay off travel and entertainment purchases at a later date. A year later, 42,000 people owned the Diners Club Card, which was accepted throughout major U.S. cities.
The Credit Card Evolves
The Diners Club Cards led to other credit cards. American Express started a credit program in 1958, also geared toward travel and entertainment and with a $300 limit. They also introduced the first card made of plastic in 1966. Bank of America’s paper BankAmericard, later renamed Visa, was introduced in 1958 as the first credit card intended for general-purpose use. The 1960s brought Master Charge, now called MasterCard. The banking group behind this card later modernized how credit cards functioned by connecting them to a central computer network.
Credit Card Challenges
An inherent conundrum existed with early credit cards: Merchants wouldn’t accept a card without cardholders, and consumers wouldn’t sign up for a card not accepted by merchants. So in 1958, a Fresno, Calif., Bank of America mailed cards to its 60,000 account holders in what became known as a credit card drop, now illegal under the Truth in Lending Act. But in 1958, those 60,000 cardholders convinced merchants to get on board, and the credit card took off.
But challenges plagued the rollout, including rampant credit card fraud and an excessive number of delinquent accounts, roughly 22% and nowhere near the predicted 4%.
Fifteen months after the drop, Bank of America had officially lost $8.8 million due to its new credit card program. If you include advertising, overhead, and other expenses, that number is closer to $20 million.
But the Credit Card industry continued to grow in the 1970s, with improved regulation, technological advances, and rebranding of credit card networks into names that we still recognize today. Affinity branding of credit cards emerged in the late 1970s, and over the next decades major credit cards were issued in the names of sports teams and leagues, colleges and universities, charitable organizations and, eventually, smaller banks, who were now able to brand their own credit cards in conjunction with brands like Visa and MasterCard.
World-wide, mass acceptance and usage of credit cards flowed quickly on the backs of these innovations.
What Does This Mean for Cryptocurrency?
A quick glance throughout credit card history shows many parallels to cryptocurrency. Like Charga-Plates and Charg-It cards, the earliest iterations of cryptocurrency–blinded cash, hashcash, B-money and BitGold–didn’t garner widespread acceptance. It wasn’t until Bitcoin came on the scene that cryptocurrency piqued mainstream interest, not unlike how BankAmericard altered the landscape for credit cards.
Yet Bitcoin has experienced its own woes, driven in great part by its early use for illegal purchases on the notorious Silk Road. The Bitcoin industry and Bitcoin aficionados had to repair its image as a reputable currency, just like Bank of America had to repair its image after its botched credit card rollout.
After the Silk Road was shut down, Bitcoin basically flatlined until 2017 when the price went from around $1,000 per bitcoin to over $19,000. It made both economists and the public take note. By the end of 2020, Bitcoin had reached its then all-time high of roughly $28,000. These days, mere months later, it’s hovering around the $60,000 mark.
As for credit cards, we all know that industry not only recovered but thrived. Despite its initial 1958 setback, Bank of America turned a profit on their credit card program as early as 1961. These days, 1.06 billion credit cards are in use in the U.S. and 2.8 billion credit cards are used worldwide.
Will cryptocurrency continue to follow in the credit card wildly successful footsteps? Let’s hope!