The First Credit Card Ever (2016) | Hacker News Reader

The First Credit Card Ever (2016)

saturdayeveningpost.com

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> Within a few weeks of publication, there were more than 8,000 Diners Club cardholders. By the end of the year, membership was near 100,000.

It sounds like a success right from the get go. But I don’t understand the motivation of those early adopters. Don’t compare it to today’s impossibility of renting a car without a credit card, the growing hostility to cash in Western countries, and the normalcy of buying all your stuff online. None of that applies to 1950.

Remember that this was only for restaurants at the time. And this was a charge card that requires you to pay your bill in full every month, meaning that you could afford those restaurants. You could not spread your bill over a period of months or years.

> We went over all the good points of the idea: You don’t have to carry a lot of cash. And perhaps most importantly, you have a receipt for a tax write-off if you take out a potential customer or client.

You don’t need to crazy amounts of cash for dinner for one night. Besides, carrying cash was normal. In 1950, it was not unusual to buy a car with cash. You could always get a restaurant receipt even if you paid cash. None of the justifications in the article makes sense to me.

My theory is that those early adopters signed up because the card gave the illusion of status or eliteness. You show this magic card to the waiter, sign your name, and you walk out without paying any money. All the other use cases and benefits (and detriments) of credit cards came in later years.

A restaurant is kind of the ideal use case for this though: you don't know what you want in advance, or how much it'll cost. So here's this magic card which means you can go in and never worry about being caught short on the bill.

Like, there was definitely a status element to it but I think that's overlooking some real advantages which were uniquely applicable to that experience.

I can see the convenience of not having the "hassle" of cash and having a single receipt at the end of the month.

I recently switched to a public transport card that stores all my trips and gives me a single invoice at the end of the month that is automatically debited from my bank account (SEPA Direct Debit). Before I had to constantly top up my card with money (prepaid) or buy individual tickets. I really like this system!

I do think that ditching cash for some type of electronic payment has some positives in current political climate: if people and businesses become utterly dependent on internet based payments, then it becomes harder for governments to do internet block-out, without doing serious damage to economy and crippling normal life.

Surely you mean easier. It's easier for governments to control electronic money than cash. The government knows nothing about all that cash under that mattress.

If it comes that people are going to starve because internet is cut, then governments would not decide to cut internet on so light grounds.

Wholesale, yes, but targeted harassment of groups out of political favor would be possible.

Most of the governments that would cut internet don’t care of the ordinary people starve as long as they can keep the military - ie the people who can either kill them or protect them fed.

This is also the reason that sanctions don’t work.

Well internationally I suppose, people starving will prompt stronger reactions, that people merely lacking internet connectivity.

You need quite a lot of cash to dine out. If you’re getting wine and things for a few people it can easily be many hundred of dollars in today’s money. Even people who normally carry cash don’t carry that much. What are you going to do in the evening? Go to a bank? They're closed. And if you’re travelling with work and dining out each night, maybe with clients, how much is this adding up to over a month? What other expenses are similar to that? Hotels at the time would invoice or take cheques so you didn’t need cash for those. Paying for restaurants probably seemed a real pain point at the time.

Hence the name Diners Club.

That might be today's perspective, but if you take a look at seniors paying for groceries you'll sometimes see grannies with a few hundred on them. Anecdotally, I work with a 50-something who told me that when he was in his late twenties in a high-ish role where in he had to sometimes corral wilder co-workers he as a rule carried a couple thousand on him. That's something like $5000 today. He thought it was a lot, but not crazy.

Partly the status thing, yes ("club"), but absolutely for the convenience of expense accounts. If you're on expenses and paying cash, then you're fronting the money out of your own pocket in the expectation of reinbursement. If you're on a card, you can just take the bill you've been given by the card company to your expense department.

You also didn’t have ATM’s in the 50’s, which meant a fancy dinner required planning ahead to visit a bank branch during working hours.

But yes, I think the cool factor of taking some friends or clients to a restaurant and walking out without paying contributed as well.

> Don’t compare it to today’s impossibility of renting a car without a credit card, the growing hostility to cash in Western countries

It's interesting, I have no idea what you're talking about.

I just rented a car in the UK three days ago without a credit card, and I still use cash for every single purchase except plane tickets online, which is the only reason I even have one.

Note, I live in Canada/Australia, spent the whole summer in the US and I'm just visiting the UK.

> I just rented a car in the UK three days ago without a credit card

Did they give you a discount for cash? If not, why on earth would you ever throw away the free extra insurance that you get with a credit card?

Not all credit cards offer a rental car insurance benefit. Many credit cards have trimmed all those extra benefits in recent years.

Credit cards with fringe benefits like that (and massive points back, etc.) are really an American thing. They're few and far between on the ground in other countries.

Also, keep in mind, you're paying for it one way or another. There is no such thing as free.

Someone is paying for it. In this case it's people who keep a balance and pay interest. If you never do that, you're getting those benefits mostly for free.

Merchants have to pay a decent sized fee on every transaction, and that fee is definitely passed on to the consumer via higher prices. But it’s also (arguably unfairly) equally passed on to consumers paying cash.

That's a fair point as well, although the fee is generally quite small.

> They're few and far between on the ground in other countries

This thread is about doing something in the United Kingdom, isn't it? Why are you bringing up America?

> Also, keep in mind, you're paying for it one way or another. There is no such thing as free.

If the choice is to pay the same amount in cash, or on a card, and you only get the insurance on a card, then for all practical purposes the insurance is free. You cannot pay less if you give up the insurance. There is no extra cost to you to use it.

That's not entirely true, its written in UK law that you get better protections with a credit card - see Section 75 protection. You'd be pretty foolish to use cash for large expenses due to this.

Correction, you are also paying for my fringe benefits. Very few places offer a cash discount, while CC fees are baked in into all prices.

In the UK, as in the rest of Europe, credit cards with benefits such as complimentary insurance (or indeed things like cash back) aren't as common as in the US. I believe Amex is the one of the few companies that include insurance in the UK. With other cards such as Barclays and HSBC, you typically have to pay a monthly credit card fee to add the feature.

> The cardholders would be charged nothing, the restaurant would receive 93 percent of the total, and Diners Club would get the rest.

I personally found this a bit more startling. How did they convince restauranteurs in 1950 that this was a good value proposition for them?

Probably something to the tune of "people who regularly expense meals for business make up a large portion of our membership so what you lose in margin you more than make up for in volume."

Also, the people paying with card are less likely to care about pricing, so they can simply charge higher prices.

Reduction of theft from the till risk.

"Let's order another few bottles of wine."

"Can't, we didn't bring enough cash with us."

The "Diners' Club" story is fun to tell, but it's really a fictional story created for advertisement.

* Actually, there were a lot of "credit cards" when Diners Club started the business. One of the oldest such cards is one issued by Shell (oil company) circa 1920, predating more than a decade.

* The real innovation of Diners Club's card was that it was general purpose. It could be used for multiple merchandises, while other cards were very purpose-specific (e.g. Mobil card for purchasing gas from the store, Western Union card for its telegraph service).

A good resource to read about the origin of credit cards is "The credit card industry: A History" By Lewis Mandell.

> My theory is that those early adopters signed up because the card gave the illusion of status or eliteness

The primary motivation to own diners cards was post-pay. To put it simply: you can eat a dish without paying for it now. That was appealing for people who just started to enjoy consuming stuffs. Yes, you still need to pay the full amount every month, but minimum monthly payment (a.k.a. revolving credit) was an innovation yet to be conceived...

I'm part way through "The Credit Card Catastrophe" right now. It was written by the author of the article and is also worth a read.

Status definitely played a part. Because the methods for determining creditworthiness were less sophisticated at the time, the bar to clear was high, and being approved for the card signaled status, wealth, and trustworthiness.

In addition to some of the card’s unique features mentioned by other posters, being able flaunt a status symbol to friends, customers, and business associates played no small part in the success of the card.

Electronic Value Exchange (https://www.springer.com/gp/book/9781849961387) is a great book on the history of card payments. Well researched and very thorough. I’m told its commonly recommended internally at Stripe.

I'm actually a bit confused because I thought that predecessors to Visa would classify as the first credit cards in earnest.

This blog has an amazing history of Visa, as well as a very deep breakdown of its financials. Probably a very interesting read for anyone reading these comments.

https://minesafetydisclosures.com/blog/2019/5/29/part-l-a-hi...

My first corporate credit card (for travel expenses) was a Diners Club. This as in 1986. It was terrible. No place would take it. I had to put all my expenses on my own credit card. Fortunately my credit limit wasn’t an issue, but having a corporate credit card that nobody will take kind of defeats the purpose of having a corporate credit card. We switched to American Express the next year.

If anyone enjoyed this piece there's a great book called "A Piece of the Action" by Joe Nocera which details the origins of the credit card and discount brokerage industries. https://www.amazon.com/dp/B00AYIDT74/

Having a credit card is STILL frightening. Specifically, I don't like how little verification takes place, how easy it'd be for someone else to start using my card if they gain physical possession of it, and how I wouldn't find out about purchases made on my card unless I'm actively monitoring it every day (or every hour!) I haven't yet found a bank that would send me an email or text message for every single transaction on my credit card, or the option to turn on such a service (which incidentally, should also notify me whenever that service is turned off.)

I have a chase sapphire reserve card and get an email for every transaction. Set the "alert for transactions over amount" to $0.01. I had grand plans of piping these emails into a google sheet to track and categorize expenses but haven't completed the project yet.

> haven't yet found a bank that would send me an email or text message for every single transaction on my credit card

I haven't seen that for credit credit cards (maybe due to the often-delayed auth cycles), but many debit cards (where charges are done in realtime) where I live do it by default, and my Amex sends you phone notifications if you add it in Apple Pay (even for transactions that were not done through Apple Pay)

The Chase and Amex apps will give you push notifications. I have emails set up for some transactions on my Amex cards but not the Chase ones, I assume you can get emails for any transactions with both. Also, you have 60 days to dispute a charge and you won't be responsible for it. I make sketchy payments with my cards because I know I can dispute them and almost certainly win. I stress way more the few times I carry >$300 cash than even the times that I know a card is lost.

The beauty of a credit card is that none of the things you're afraid of are your problem.

Just check your statement before paying the bill, and if you lose your card, freeze it. Also, most credit cards will inform you of purchases somehow, so maybe you need to get a new card.

> The beauty of a credit card is that none of the things you're afraid of are your problem.

This is true mostly if it's a magstripe or "card-not-present" transaction, or done online without two-factor authentication.

Otherwise, the burden tends to fall onto the cardholder to provide some form of proof that their card details were compromised.

Use an Apple Card with Apple Pay or something similar from Samsung. You are immediately notified of transactions via notifications to your phone within minutes if not seconds. It’s also much easier to access and understand your transactions

I can't speak to regional banks or credit unions, in the US, but the major US national banks ALL have options to be able to be SMS'd, email'd or in-app instantly notified for a wide variety of events on or related to a card (auths, clears, bills due, bills paid, over a balance threshold, overdrawn, etc.) and the ability to freeze the card through the app or web until it is unfrozen. Capital One even has the ability to generate a one-time PAN to be used in Internet purchases.

Interesting read.

Does anyone have a link to the earliest known credit card compromise to complement this article? I'll research it and see what I can find.

Wait a second. How old is the author?

92. https://www.nerdwallet.com/blog/credit-cards/matty-simmons-i...

Wow! Very interesting piece.

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