A moment of reflection as we enter the 2019 Fourth of July summer-cycle. Credit cards are an American invention, a tool invented to enable purchasing, anytime, anywhere. Below are a few factoids to ponder, just before your barbeque.
The Credit Card: Originally for Businessmen. Think Mad Man and NYC. Think Harry Truman and Dwight Eisenhower. From a Nerd Wallet story picked up by the Dayton Daily News:
- When New York businessman Frank McNamara started Diners Club in 1950, he had big dreams for his new company and the credit card it would issue.
- “‘Someday,’ he predicted, ‘restaurants all over New York will honor this card,’” former Diners Club executive Matty Simmons recalled McNamara telling him early on. Simmons recounted the conversation in his book “The Credit Card Catastrophe.”
- At the time, no other company had successfully issued a credit card accepted across several merchants. But McNamara was right about the future, and then some. As the first major multipurpose charge card issuer, Diners Club gained widespread acceptance among merchants and paved the way for other issuers.
On Dee Hock, the person who “invented” Visa, from the Washington Post (1994) (One of my favorite reads)
- America began to change on a mid-September day in 1958, when Bank of America dropped its first 60,000 credit cards on the unassuming city of Fresno, California. That’s a word they liked to use in the credit card business to characterize a mass mailing of cards —a “drop”—and it is an unwittingly apt description.
- Like so many subsequent moments in the evolution of personal finance in America, it was years before the significance of that date became clear — years before Bank of America would celebrate its original BankAmericard as the first all-purpose credit card to take root; when it would note with pride its history as the precursor to Visa, one of the two giant credit card systems; when it would draw attention to its role in helping to make credit cards the most ubiquitous financial instrument since the check, an unambiguous commercial success story.
When the Office of the Comptroller of the Currency audits bank card issuers, they review risks associated with these seven factors. Straight from the audit manual.
- Credit Risk
- Operational Risk
- Liquidity Risk
- Strategic Risk
- Reputation Risk
- Interest Rate Risk
- Compliance Risk
Today, Americans owe more than a trillion dollars in revolving debt, according to the Federal Reserve Bank.
- In fact, $1.064 trillion is in revolving debt today
- In the first Federal Reserve report on consumer debt, January 1967, the metric was only $1.4 billion.
Enough light reading for a hot July 3rd.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group