What The First Credit Cards Were Like - Forbes...The Little Black Book of Billionaire Secrets AUG...
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8/30/16, 12:26 PM What The First Credit Cards Were Like - Forbes Page 1 of 35 http://www.forbes.com/sites/clairetsosie/2016/08/29/what-the-first-credit-cards-were-like/#53b3071855a2 Active on Twitter Apple Found To Have Received Illegal Tax Benefits, Ordered To Pay $14.5 Billion In Back Taxes +7 comments in the last hour What Donald Trump's Tax Returns Won't Tell Us, But Hillary Clinton's Do Active on LinkedIn Young Hedge-Fund Manager Cracks The Private-Equity Code: Small Stocks And Leverage SAPVoice: Could Big Data Have Saved Ancient Civilizations? Active on Twitter Broadcast Media Has A Youth Problem The Little Black Book of Billionaire Secrets AUG 29, 2016 @ 12:27 PM 499 VIEWS What The First Credit Cards Were Like Investing #LifeHacks / , YOUR READING LIST LOG IN BETA
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8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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In1950,DinersClubfounderFrankMcNamaraintroducedanovelmethodofpayingforpurchases.Hecalledit a“creditcard.”
ButwhenMcNamarapitchedtheidea,
expressedbyForbesContributorsaretheirown.
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hedidn’ttalkaboutrewards,perks,interestratesorfees,factorsthatmakeorbreakcreditcardofferstoday.Instead,hefocusedonwhatsethiscardapartfrom
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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previoussystemsthatletyoumakepurchasesoncredit:Youcoulduse itatseveraldifferentmerchants,insteadofjustone.
“It’sperfectforthebusinessman,”McNamaratoldMatty
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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Simmons,wholaterbecameaDinersClubexecutive,asSimmonsrecallsin hisbook“TheCreditCardCatastrophe.”“Youpayallyourbusinessentertainmentwithonemonthlycheck.Youdon’t
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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havetocarrya lotofcashwithyou,and,mostimportantly,youhavereceiptsforyourfirmandentertainmentreceiptsfortaxdeductions.”
Creditcardsstilllet
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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cardholderspay in“onemonthlycheck,”as thefirstcardsdid,butthat’saboutwherethesimilaritiesend.Onceaproductonlyforthewealthy,acceptedatonly afewplaces,credit
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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cards nowallowmillionsofpeopletoborrowmoney,earnrewardsandmakeeverydaypurchases.
Here’swhatthefirstcardswerelikeandhowtheyevolvedovertime.
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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Thefirstcreditcardsrequiredpaymentinfulleachmonth.
Creditcardsthen:McNamaradubbedhisproducta“creditcard,”butbytoday’sstandards,we’dcall itacharge
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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cardbecauseitrequiredyouto payin fullat theendofeachmonth.Youcouldn’tcarryabalancefromonemonthto thenext.
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8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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Inthisway,theDinersClubcardwassimilartomanyof itsforerunners,themetalcharge-platesissuedbydepartmentstores,oilcompanies
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8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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andotherretailersat thetime.Evenby thelate1950s,DinersClubstillhad“nopenaltyorinterestchargesforpaymentsmadeafter30days,”Simmonswrites.Thecompany’smain
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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sourceofrevenuewasthe7%fee —calledinterchange—chargedtomerchantsoneachtransaction.WhenAmericanExpresslauncheditsfirstcardin1958,it alsorequiredpaymentin full
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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at theendof themonth.
Thesecardsoffereda waytoconsolidateentertainmentexpensesbutweren’tmeanttoenablecardholdersto paydownbalancesovertime.
BankofAmericachallengedthis
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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conventionwithitsBankAmericard,thefirstgeneralrevolvingcreditcard.LaunchedinCaliforniajust amonthbeforeAmEx’sfirstcard,thenewproductletconsumerstakeoutshort-termloans
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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andrepaythemon aflexibleschedule,withinterest.
Creditcardsnow:Revolvingcreditcardshavebecomeubiquitous,andtheonlymajorissuerstillofferingchargecardsisAmerican
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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Express.Tensofmillionsofcardholdersin theU.S.alonecanborrowmoneyforpurchaseswhenevertheywant,withtheoptionofpayingitbackovertimewithinterest.Borrowing
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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moneyisoftenexpensive,though:TheaverageAPRoncreditcardsthatwereassessedinterestwas13.35%lastquarter,accordingtoFederalReservedata.
Carryingdebtstillisn’t
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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somethingyouwantto doif youcanhelpit. Ifyoupay infulleverymonth,youwon’tbechargedinterest.Still,havingtheoptiontoborrowwhenyouneedto isvaluable.
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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If youknowyou’regoingto becarryingdebt,youcanalsoavoidinterestbygettinga cardwithanintroductory0%APRoffer.
Thefirstcreditcardswereusedonly
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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fortravelanddiningexpenses.
Creditcardsthen:Asthenameimplies,DinersClubcreditcardswereinitiallyacceptedonlyatrestaurants.ThatwasMcNamara’soriginalidea.But
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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thecard’shighmerchantfeewasanobstacleforacceptance.
“Sincerestaurantswhocouldafforda 7%interchangetendedto bemoreexpensive,itendedupbeingaproductfor
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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thewealthy,”saysMichaelMoeser,directorofpaymentspracticeatbankingconsultingfirmJavelinStrategy.Soonafteritlaunched,DinersClubexpandedtoincludehotels.
Earlycompetitorsalso
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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wentaftertravelandentertainmentmerchants.WhenAmericanExpressreleaseditsfirstpaperboardcardsin1958,theywereacceptedby animpressive17,500establishmentsonthefirstday,PeterZ.
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Grossmanwritesin hisbook“AmericanExpress:TheUnofficialHistoryof thePeopleWhoBuilttheGreatFinancialEmpire.”AmExchargeda 6%interchangefeeand a$6annualfee atfirst— $1more
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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thanDinersClubat thetime.“Already,theAmericanExpressCreditCard,as itwasofficiallycalled,rivaledtheDinersClubcardinsizeandscope,”Grossmanwrites.
WhenBank
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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ofAmericalaunchedtheBankAmericard,itpersuadedseveraltypesofretailerstoacceptit. Buttherewas acatch:It wasvalidonlyinCalifornia.
Creditcardsnow:Fromrestaurantdinners
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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togroceriesandgas toyourutilitybills,youcanchargealmostanythingtoyourcreditcardthesedays.
Thisbroadacceptanceispartlybecausemostcreditcardissuers
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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nowoperateunderVisa(whichgrewout oftheoriginalBankAmericard)andMasterCard(bornas“MasterCharge”).Thesemassivepaymentnetworksworkoutacceptanceagreementswithmerchantssothatissuersdon’t
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haveto doitindividually.Theyalsosetinterchangerates,whicharemoreaffordableformerchantsthantheyusedto be.Typicalinterchangeratesnowrangefrom2% to3% ofeachtransaction,
8/30/16, 12:26 PMWhat The First Credit Cards Were Like - Forbes
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Gallery
insteadof the6% or7% ofthepast.About9.5millionU.S.merchantsnowacceptVisaandMasterCardcreditcards,accordingto2014NilsonReportdata.
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