2. Credit Card Mom
Credit Cards introduce financial flexibility into modern consumers' lives. For those who always pay off their balances, credit cards eliminate the need to carry cash or obtain check-cashing approval. For those who carry a balance, credit cards allow acquisition of goods and services that cannot be paid for in full when purchased.
The twenty-first century extent of credit card use may be new, but its function is not. Before 1900, American families obtained "book credit" from merchants who allowed the same financial flexibility now provided by credit cards. But urbanization and the chain store movement rendered the old system of book credit infeasible.
The first step on the road to credit cards was development of store-specific metal charge cards in 1928. These cards continued the system of extending credit to favored customers. Clerks no longer needed to assess customers' creditworthiness; any one with a charge card received store credit.
Oil companies moved into credit cards as a way of building a customer base. As automobiles increased in popularity in the 1920s and gasoline stations proliferated, oil companies gave loyal customers paper "courtesy" cards that could be used at any of their stations. Balances were paid in full monthly. In 1939, Standard Oil of Indiana made a startling move when it mailed 250,000 unsolicited cards. By 1940, over 1 million cards circulated. In the 1950s, gas companies moved to embossed aluminum charge cards in the size still common in the early 2000s.
Early charge cards did not possess the key feature of modern credit cards: revolving credit, which allows card-holders to pay balances over time while simultaneously charging new amounts. Wanamaker's Department Store in Philadelphia moved toward a revolving charge account in the late 1930s when it gave customers four months to pay off a balance. This was not truly revolving credit, however; new charges were prohibited until the previous balance was paid. William Gorman introduced true revolving credit to department store cards in the 1940s, first at the L. Bamberger & Co. department store in Newark, New Jersey, and in 1947 at Gimbel Bros. of New York.
In all these cases, the card issuer's goal was to boost sales of the issuing company. Indeed, due to bad debts and fraud, the credit operations often generated a loss.
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