The first credit card was the Diners Club card, issued in 1950

The Diners Club card came before Visa, Mastercard, or American Express. It was created by Frank McNamara and Ralph Schneider, two businessmen in New York who wanted a way to pay for restaurant meals without carrying cash. The card worked by letting you charge a meal at a restaurant, then pay the bill monthly. The restaurant trusted Diners Club to collect the money from the cardholder later.

McNamara got the idea after forgetting his wallet at a restaurant and having to call his wife to bring cash. He realized a card that proved you could pay would solve that problem. The first Diners Club card was made of cardboard, not plastic. It was accepted at 14 restaurants in New York in its first year.

What made Diners Club different from earlier payment methods was the charge card model: the card issuer (Diners Club) sat between the customer and the merchant, guaranteeing payment. This was new. Before that, stores issued their own cards to regular customers, but those were just store credit — not a card you could use anywhere.

Key Takeaways

  • Diners Club, founded in 1950, was the first card that let you charge purchases at multiple merchants and pay the bill monthly.
  • American Express launched its card in 1958 and became the dominant charge card for decades, especially for business travel.
  • Bank of America's BankAmericard (1958) was the first true credit card issued by a bank, allowing you to carry a balance and pay interest.
  • Visa and Mastercard emerged in the 1970s as networks that connected many banks, making credit cards available to far more people.
  • The shift from charge cards (pay in full monthly) to credit cards (carry a balance) happened gradually and changed how people borrowed money.

American Express and the charge card era

American Express entered the card business in 1958, eight years after Diners Club. Amex was already a well-known travel company, so it had an advantage: it could market the card to business travelers who already knew the brand. The Amex card worked the same way as Diners Club — you charged purchases and paid the full bill monthly.

Amex became more successful than Diners Club because it had more resources to sign up merchants and because it offered better perks like travel insurance and purchase protection. By the 1960s, Amex was the card most people thought of when they thought of credit cards, even though it was technically a charge card (you had to pay the balance in full each month, not carry it).

The charge card model worked well for wealthy customers and business travelers, but it didn't work for ordinary people who wanted to borrow money and pay it back over time. That's where banks came in.

Bank of America created the first credit card

Bank of America issued the BankAmericard in 1958, the same year Amex launched. The BankAmericard was the first card issued by a bank, and it worked differently from Diners Club and Amex. Instead of requiring you to pay the full balance monthly, the BankAmericard let you carry a balance and pay interest on what you owed. This was the birth of the modern credit card.

Bank of America mailed BankAmericards to customers in California without asking first. This unsolicited mailing was controversial — some people were upset to receive a card they didn't request — but it worked. Thousands of people started using the card, and other banks noticed.

The BankAmericard eventually became Visa. In 1976, Bank of America licensed the BankAmericard brand to other banks, and in 1977 it was renamed Visa to reflect that it was now a network, not just one bank's card.

Mastercard and the rise of bank networks

Mastercard started as Interbank in 1966, created by a group of banks that wanted to compete with Bank of America's BankAmericard. Interbank was renamed Mastercard in 1979. Like Visa, Mastercard was a network that let many banks issue cards under the same brand.

The shift to networks was important because it meant credit cards were no longer tied to one bank or one company. A bank could issue a Visa card or a Mastercard, and the cardholder could use it at any merchant that accepted that network. This made credit cards much more useful and much more common.

By the 1980s, Visa and Mastercard dominated the credit card market. Diners Club and Amex still exist, but they are much smaller. Discover, launched in 1986 by Sears, became the fourth major network.

How plastic replaced cardboard

The first Diners Club card was cardboard, but plastic cards became standard in the 1960s. Plastic was more durable, easier to carry, and could hold more information. The magnetic stripe on the back of the card, which stores your account number and other data, was invented in the 1960s and became standard by the 1970s.

Chip technology came much later. The first chip cards were issued in France in the 1990s. Chips are more secure than magnetic stripes because they are harder to counterfeit. The United States was slow to adopt chip cards — most American cards didn't have chips until the 2010s.

The difference between charge cards and credit cards

The original cards — Diners Club and American Express — were charge cards. You had to pay the full balance every month. There was no interest because you weren't borrowing money; you were just deferring payment for a short time.

Credit cards, starting with the BankAmericard, let you carry a balance. If you didn't pay the full amount due, you paid interest on what was left. This meant you were actually borrowing money from the bank. The bank made money from the interest you paid, not just from the fee the merchant paid.

This difference matters because it changed how people used cards. Charge cards were for convenience and status. Credit cards became a tool for borrowing. Today, most cards are credit cards, though some premium cards (like certain Amex offerings) still work as charge cards.

How rewards programs came from the credit card wars

Early credit cards had no rewards. You got a card, you used it, you paid the bill. Rewards programs started in the 1980s as banks tried to get customers to use their cards more often and carry higher balances.

The first rewards were simple: cash back or airline miles. Banks realized that if they gave you 1% cash back on every purchase, you would use the card more, and the extra interest you paid on your balance would more than make up for the cash back. Rewards became a way to make borrowing more attractive.

Today, rewards are a major part of how credit cards compete. Different cards offer different rewards — some focus on cash back, some on travel, some on groceries or gas. But the basic idea is the same as it was in the 1980s: the bank is paying you a small amount to encourage you to use the card and carry a balance.

Frequently Asked Questions

Did credit cards exist before 1950?

Store credit cards existed before 1950 — department stores and gas stations issued cards to regular customers. But these were not credit cards in the modern sense. They only worked at one store, and they were just a way to keep track of what you owed. The Diners Club card was the first card that worked at multiple merchants and was issued by a company separate from the stores.

Why did Bank of America mail cards to people who didn't ask for them?

Bank of America wanted to get the BankAmericard into as many hands as possible, as fast as possible. Unsolicited mailings were legal at the time. The strategy worked — many people who received a card they didn't ask for started using it. This practice was later restricted by law because of fraud and identity theft concerns.

When did credit cards become common in the United States?

Credit cards became common in the 1970s and 1980s, after Visa and Mastercard established themselves as networks. Before that, most people paid with cash or checks. By the 1990s, credit cards were the dominant form of payment for most purchases. Today, credit and debit cards together account for more than half of all consumer spending.

Are American Express cards still charge cards?

Most American Express cards are charge cards — you pay the full balance monthly. But Amex also issues some credit cards that let you carry a balance. The distinction matters because charge cards don't charge interest, but they require discipline to pay off each month.

What happened to Diners Club?

Diners Club still exists but is much smaller than Visa, Mastercard, or American Express. It is now owned by Discover Financial Services. Some premium cards still carry the Diners Club brand, but it is no longer a major player in the credit card market.