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Comment by teej | Hacker News Reader

> It’s often forgotten, but prior to credit cards, many Main Street retailers like e.g. pharmacies maintained hundreds or thousands of credit accounts for customers individually, necessitating their own back offices, accounting, and collections headache.

This article is a great history of how the modern credit card came into being https://www.washingtonpost.com/archive/lifestyle/magazine/19...

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My great grandfather owned a grocery store in our town somewhere around 1940s-1970s (the only one at the time). Town was much smaller then but about 200,000 people now (edit: I looked it up, it went from about 10K people to 200K since 1940). My last name is somewhat unique in spelling and it was called "$LASTNAME Grocery" so I still occasionally* get a random old timer that asks me if I'm related to him. When I say yes, they always respond similar "Great man. A lot of people would have starved if he didn't offer credit."

There's a particularly interesting twist to the story that I really always enjoyed. When the person I'm talking to is a POC, typically black, they always also mention that he was the only person in town that gave their family credit for anything. This is small town Texas, still very conservative and still above 75% white as is/was my family.

Sorry for the tangent but the discussion made me think of this mildly interesting story.

* Has dwindled quite a lot in last decade or so. Because of the time, those folks that remember the store are losing numbers (but also I haven't lived there in a while either)

do you know if the grocery store was relatively successful? I imagine that doing business with whole town, instead of just 75%, is economically preferable

I think it did ok. I never met my great grandfather. I heard a lot of family stories about the store. A lot of family time across 3 generations was spent there. I’m the first that never saw it first hand.

I knew the great grandmother. I remember her fondly, but she didn’t talk much other than in duty of running the house. Food, cleaning, gardening, laundry, etc. They were depression era mentality. Saved all the butter container. I think they themselves were raised by Czech/Pol immigrants to Texas.

Anyways, I knew they did well financially because of seeing my grandfather squander a ton of assets. They were super modest folks but as the town grew, they built apartment complex. They had several 100s units. Also the grocery store was on a gold mine of a street intersection. Supermarket competition and sufficient rental income are my guess at what caused my great grandfather to close the store and sell the land.

Our local small town cafe did this up until COVID... via a big three ring binder. You could run either a credit or debt as long as it was close and a couple of families i know would do this so their kids could stop and get snacks without cash.

I went with a girlfriend to her small-town-CA home, about 15 years ago. Went to get groceries and she just gave their name and a 3-digit number and the groceries went on the family account. I'm 40, but I had never before seen that in my life.

Eureka CA?

Nope, other side of the state.

I saw this happening in Woodside CA (very much in the SF Bay Area) less than a year ago.

Yep, Robert’s Market does this. Great for kids who walk home from the elementary school down the street, and can pick up a snack on the way home.

Given the demographics of Woodside, it’s also frequently used by nannies and other family helpers who shop for the uber-wealthy residents who call Woodside home…

This was (and still is) the norm in Mumbai where I grew up. We had an account at the local grocery store; the store owner knew us by name and would let us buy snacks on the way back home from school or after a cricket match. The term “khaata” (translation: account) is well known in Mumbai, and should evoke feelings of nostalgia about a simpler time for others who grew up in Mumbai like I did.

Accounts were typically settled at the end of the month. The system is predicated on trust and customer service.

As for pharmacies, it’s often because insurance companies didn’t do online billing.

People would have to pay for their drugs, submit a claim by mail (or drop off at their employer) and get a cheque.

Sometimes they could send the cheque to the pharmacy directly.

Sometimes the pharmacy (or dentist or whoever) would submit the claim for you.

Credit cards reduced the necessity of this (so you’re not floating the cost, but the pharmacy is directly until they get paid by the insureco).

There’s still some people that will pay cash in Canada for their meds and submit their receipts so they can get that 1-2% in points, but that doesn’t really work where drug prices aren’t controlled.

As pharmacy chains and insureco increasingly become one and the same, and the insureco can take its time paying out-of-network pharmacies to starve them a bit.

I find this ironic since now days it seems every store has its own credit card. I even have a card from pep boys (and was given a free oil change just to sign up.)

It's because there are white label credit cards that are extremely easy to setup if you're a business and they're so profitable. Not only does the store get a sale upfront which a customer might not have been able to afford without it, they get additional revenue when folks are slow to repay their bill.

The store gets money when customer pays the bank interest?

Yes, the retailer gets a portion of the interest payment.

Example story mentioning it: https://www.nytimes.com/2017/05/11/business/dealbook/retaile...

https://archive.md/kuW2K

Do you know if these first part transactions also bypass Visa/MC and interchange? It seems like they should have it so the affiliated merchant can just send the charges over to the issuer directly and bypass everyone else.

>it seems every store has its own credit card.

Fyi, vast majority of those are co-branded cards which means they are underwritten by a bank. Examples:

- Amazon VISA card is underwritten by Chase Bank

- Costco VISA card is underwritten by Citi Bank

If you look closely on the Pep Boys card, you'll see who the bank issuer is.

It's different from the old days of mom&pop grocery stores running their own ledger of customer accounts. The grocery store was the actual lender of credit. With co-branded credit cards, it's the bank and not the retailer that's lending money for customers to buy merchandise.

Another popular one people do not expect is Apple credit card’s bank is Goldman Sachs.

Apple doesn’t hide they partnered with Goldman Sachs.

https://www.apple.com/newsroom/2021/08/apple-card-and-goldma...

It also explicitly shows up in credit reports as "GS BANK". Had to explain that to a few friends that didn't look too closely into how Apple Card worked or the fine print of their credit line.

The physical card even has "Goldman Sachs" laser etched on the back.

It’s pretty prominently branded on the physical card.

Yeah, the have someone else run it and get some of the profit. At the end, Sears and JCPenney didn't make any money selling goods. They only made money on the store credit card.

As sibling says they’re mostly co-branded. But there was a period when every retail gas supplier and most major chains actually had their own credit cards. And you often had to, as a young person, figure out who would give you a card so you could build up credit and move up the credit card ladder.

Probably most of it predates me in adulthood, but sitting down and writing checks every week or two used to be a non-trivial chore for most people. These days the challenge for me is remembering that I do need to manually pay a few bills now and then manually.

Small hardware stores do this still for businesses, but some still do it even just for personal accounts. (Pennsylvania, Centre County area…)

This point is also made in “ A Piece of the Action: How the Middle Class Joined the Money Class”. It paints a very good historical context to understand our current financial world from the lenses of consumers.

Edit: Ops link takes you to a chapter in the book :-)

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