183 million Americans have credit cards.
You probably know how they work. You might even make a payment on one each month. But do you know any interesting facts about credit cards or why they were invented?
While credit cards may seem completely mundane, there are actually a few really cool things about them that you might not have known.
Read on for seven crazy facts about credit cards.
1. Credits Cards Were Originally Only for Dining in New York Restaurants
Ever heard of a Diners’ Club card? Have you wondered why it’s called that?
Well, there’s a pretty good reason.
In 1950, Frank McNamara invented the credit card as we know it. As they say, necessity is the mother of invention, McNamara found a niche out of necessity.
McNamara went out to eat at the Major’s Cabin Grill in New York. He changed suits before he went out to eat, leaving his cash for the evening in the other one.
At that moment, he thought that it would be rather convenient if he had a card he could use instead of having to pay cash. (Obviously, the story doesn’t completely work since if he had left his wallet in his other suit, he’d have also left his credit card.)
No matter the plausibility of the story, that’s how the legend goes. McNamara then invented the Diners’ Club card, which could only be used at select Manhattan eateries. The card later expanded for use in hotels.
The Diners’ Club card was such a hit that over 10,000 of New York’s elite signed up for it within the first year. Like a designer handbag or a well-tailored suit, it became a status symbol.
2. McNamara Didn’t Think Credit Cards Would Last!
Frank McNamara didn’t even have faith in his invention. Even after the Diners’ Club caught on, he thought it was just a passing novelty. He didn’t think anyone would continue using it once the craze wore off. Boy, was he wrong!
He sold his share for a measly $200,000. By the next decade, he was probably kicking himself, because the number of Diners’ Club card owners had shot up to 1.3 million. Oops.
3. Credit Cards Were Also “Invented” By John Briggs in the 1940s
Frank McNamara may have created the first credit card, but the concept wasn’t his alone.
In 1946 postwar America, John Briggs created the first incarnation of bank-issued credit cards. The card was from the Flatbush National Bank of New York and only members of that bank could use it.
Instead of a credit card, Briggs called it a “Charge-It” card. The only difference was you couldn’t carry the balance over each month. You were responsible for paying it off in full each payday.
4. Women Weren’t Allowed Credit Cards Until 1974 Without Their Husband’s Consent
Up until 1974, a woman could not obtain a credit card without a husband as a co-signer. This meant she could not establish any credit in her own name, making it impossible to get on the property ladder alone.
The Equal Credit Opportunity Act of 1974 made it impossible to discriminate against women based on their sex or marital status. They were finally allowed to open their own lines of credit.
5. Most People Have Credit Card Debt in Excess of $10,000
As of 2013, the average credit card debt for most American homes was $15,191. Most people pay a high interest rate on these cards, and they spend two to three times the amount of the debt in order to pay it off.
Read this credit card review to decide which card is right for you. Don’t be one of the millions of Americans who choose the wrong credit cards and end up saddled with credit card debt.
6. The Concept of Credit Started in the 19th Century
Have you ever seen a movie set in the old west where a farmer goes to the general store and asks for his goods to be put on credit? Well, that’s where the idea of credit was born.
In the 19th century, farmers didn’t always have money during the months the crops weren’t yielding. Instead, they got by the rest of the year on what they had previously harvested.
They still had to purchase items from the general store, but often didn’t have the cash in hand to do so. In order to get their items, general store owners let people buy items then and pay later. They would keep a file, or ledger, on each customer. The customers would then pay off their balances once they sold items from their farm.
Later on, as towns grew, general store managers found it more and more difficult to keep track of customers. In order to keep track of them, they established the first “credit card.” This wasn’t one that you swiped, though. Instead, it was made of cardboard and used to identify customers.
7. You Can Validate a Credit Card Using a Simple Formula
Have you ever wondered if a credit card number was valid? If so, you can validate any credit card number with a certain formula. This is called the Luhn algorithm.
You start from the right hand side, then double every second number. For example, 2222 would be 4242. Add together all of the numbers after doubling every second number. Then, divide it by 10. If you can divide it by 10, the credit card number in question is a valid one. If you can’t, the number isn’t in circulation.
Beyond Facts About Credit Cards
As you can see from these amazing facts about credit cards, they have a long and rich history. You probably had no idea about some of them, and hopefully, you learned something from these seven facts.
For more interesting facts and tricks for better financial literacy, explore the money and finance section of our blog.