Money  /  Origin Story

How Did America Become the Nation of Credit Cards?

Americans have always borrowed, but how exactly did their lives become so entangled with the power of plastic cards?

Beginning in Fresno in September 1958, Bank of America mailed unsolicited BankAmericards to its consumer accountholders, ultimately sending more than 2 million cards across California in the first few years. The cards came unexpectedly. They were also special: for the first time, the credit cards were not metal or cardboard, but embossed plastic, an innovation that added gee-wiz novelty to the bank’s card plan. The strategy proved expensive, reckless and effective. Bank of America gained a huge cardholder base, but at the cost of massive delinquencies and fraud losses.

By the early 1960s, department store and travel cards were well rooted in American wallets, but it was not yet clear that bank cards would succeed. Chase Manhattan, the nation’s second-largest bank, abandoned its credit card experiment after less than four years of trying in 1962. But other banks in the US were also struggling. Strict regulations ensured that, although banks were safe – very few banks failed in the postwar years – they were not very profitable. By the late 1960s, bankers increasingly saw credit cards, which combined innovative information technology with access to affluent consumer markets, as the road to the future – as the key to innovating around the restrictive financial rules.

The route to this future, however, was not initially obvious. Early on, credit card executives obsessed over scale. Card systems had high fixed costs, so that the more transactions a card plan processed, the lower the cost of each transaction. Yet the quest for scale ran first into the market’s fundamental division by gender. Travel and entertainment cards, like Diners Club and American Express – the latter of which began issuing cards in 1958 – catered to male business executives. Department store and bank cards, by contrast, focused on female-led family shopping. The BankAmericard was the ‘family credit card!’

In the early 1960s, Bank of America set out to merge rather than segment. The bank enrolled hotels and airlines, expanding its market from suburban housewives to their husbands. In these ambitions, Bank of America faced the second impediment to scale: geography. Under existing banking laws, it could not build branches outside of California. Its travel card competitors offered cards from coast to coast. ‘We do not believe that the Bank of America is a competitor of the Diners Club,’ boasted Alfred Bloomingdale, the Diners Club chairman, in October 1966.