~ MasterCard Stock Hits 52 Week High August 3, 2011 ~
Okay. You need a smile, and I'm here to help out. Credit on demand was the stock market winner today, keeping the market from having its longest losing streak since 1978.
Do you know how Credit Cards came to be? I have a Bank of America story for you...
The year was 1958. Bank of America wanted to get into the credit card business.
Diners Club, the very first credit card, was established in NYC in 1950 by a man named Frank McNamara. It was accepted at its outset by just 14 restaurants in New York, but within two years, companies had begun to realize the power of credit on demand, and Diners Club had grown dramatically in usage. Some 400 restaurants and about 200 car rental agencies now accepted payment by credit card.
McNamara believed that credit cards were a fad that would fade over time, and when he was offered $200,000 for his share of the business, he sold out. (His heirs would like to turn him over in his grave.)
But I digress. A man named Joe Williams was a Bank of America employee in California in 1958, and Joe had an idea. Bank of America would corner the west coast market for credit cards by giving one, unsolicited, to every person in in the fine town of Fresno, California.
Bank of America mailed out 60,000 credit cards. (This was before people had credit scores.) The fine print on the credit cards, each of which had a credit limit of $300, made the cardholder liable for all charges to the card, including fraudulent charges. The bank couldn't lose.
If big is good, bigger must be better, yes? Within 18 months, Joe Williams and his bosses expanded the credit card "drop" program dramatically, and 2,000,000 cards were sent, unsolicited, to citizens of California.
Unfortunately for BofA, 20% of the cards immediately went delinquent. "Hey," people thought, "free money!" The bank was ill prepared to deal with delinquency on accounts where nothing could be repossessed. They were even less prepared to deal with credit card fraud.
Bank of America lost nearly nine million dollars on its credit card launch, and Joe Williams was looking for employment elsewhere. (See? I told you I would make you smile!)
Bank of America recovered, but don't you wonder whatever happened to the BankAmericard? Bank of America changed the name to VISA in 1976.
Today, we Americans have more than six hundred million credit cards in our pockets, wallets and purses. Credit on demand wasn't a fad, and a card is swiped somewhere in the world ten thousand times each and every second!
I just thought you might like to know... :)
_____________________
I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender
NMLS #223495
SUNSTREET MORTGAGE LLC ~ Correspondent Mortgage Bank
Offices in Mesa, Tucson, Sierra Vista & Nogales
Thanks for posting. I enjoyed reading it. I will keep it in mind. Thanks again.
Tara,
Thanks for being the first to comment!
Mike in Tucson
Hi Mike-
I actually read your fine post and remember well the first unsolicited credit card that I received. I was all of 17. It was shocking to me that the bank just mailed it out! This was in the days before credit cards used credit scoring and if you had a bank account, companies would just mail one to you.
Now, self-employed people can barely get a mortgage and the documentation required is extensive....
--Sara in San Antonio
Thank you. I forgot they changed it to Visa. We use MasterCard for credit....and a Visa for debit. Hopefully, Visa doesn't get ANY money. And, we pay off the MC as soon as possible, but it is great for emergencies.
Mike
Very interesting story, just leave home without it.
Good luck and success.
Lou Ludwig
Great story. I never knew the history of the credit card. Thank you for sharing that. I will definitely remember this one! Active Rain is so great for learning new things! Awesome!
Good story, scary stuff credit cards, we all grew up with them and it is hard to use cash in many circumstances, especially with the advent of internet buying.
Mike - Thank you for sharing quality information on the history of credit cards and BofA credit cards
John,
You're welcome; thanks for stopping by.
Mary,
That's a good point, and people are forced by the FICO system to have credit if they want to buy a home today.
Diane,
Isn't this a great community?!
Lou,
That's hard to do in this day and age.
Suzanne,
That it is; thanks for stoppin by to comment.
Sara,
I'll bet you were one of the responsible cardholders, though. Thanks for contributing to my blog.
Mike in Tucson
Ah! Memories. I had a Diners Club. Am I dating myself???
Too late.
Lenn,
LOL
Mike in Tucson
Mike - nice story, and I am not surprised that Bank of America found a way to lose money on a great idea. Thomas Jefferson was probably laughing in his grave.
That did make me smile! They were aggressive just sending out $300 of FREE money.
Wonder how the 20% deliquency rate on the credit cards compares to mortgate deliquency for BoA (including Countrywide).
That is a very interesting story about the history and birth of the credit card. I'm sure the initial loss they more than made up for over the years.
Great history lesson for all of us in the financial sector and yes it did make me smile. Thanks!
Hello Mike,
Nice history lesson...gee, Bank of America lost money then and the continue to - unfortunately, it's the taxpayers money!
Very informative! To think the credit card has evovled in my lifetime! Incredible!
I never had a Diners Club card but Visa and American Express have been my card of choice. Thank you for your interesting blog about credit card history :-)
In 50 years they'll be writing about how BOA managed their short sales. I wonder what history will say.
That's hilarious! I forgot that I used to get credit cards in the mail all the time even 8 - 10 years ago! Wow how things have changed!
Do you mean to tell me that only a mere 53 years ago people paid for what they purchased with CASH and relied on their means to obtain things? And civilizations grew AND prospered without credit cards?!? Amazing!
Why am I not surprised by the 20% delinquency rate? Same old problems in this country!
That was a very interesting story! Thank you for sharing it!
Mike - I have a vague recollection of BankAmericard, but didn't realize it was a precursor to Visa. Thanks for the history lesson and the smile.
Interesting story about the history. Although I was but a mere toddling child, I remember the Diners Club card and the Bankamericard. Love the reminder.
Sandy,
Oh, come on! You weren't even born yet. LOL!
Christine,
You're most welcome; thanks for stopping by.
John,
You're welcome!
Don,
Their stock sure took a beating in the last several days, didn't it?!
Carla,
I tried to pay cash for gas yesterday at Costco, and they wouldn't take it!
Gabe,
Ain't it the truth!
Erica,
I sure miss Paul Harvey!
Dave,
I bet it won't be good.
Ann,
You're welcome! Thanks for stopping by to comment.
Barb,
I thought the same thing!
Lisa,
Use the only weapon you have: VOTE!
Jim,
Thanks for mentioning the smile!
Eileen,
No doubt!
Cindy,
Have you noticed what's happened to B of A's stock price since last Friday?!
Chuck,
Yes they were!
Larry,
Thomas Jefferson saw this coming. I'm re-reading the Federalist Papers.
Mike in Tucson
Interesting post.
Bank of America was losing money back then and they are losing today.
Interesting post , thanks for sharing.
Hello Mike - This does bring back some memories. I remember my father having a Diners Club card when we lived in NY. Very interesting story did not know the history behind the credit card. I am going to reblog this great story. Thanks for sharing.