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A Brief History of Credit Card Processing

The first known use of a card to make purchase dates back all the way to 1914, when Western Union issued a metal plate to its employees. This metal plate was in lieu of a paycheck, and it was meant for use in company owned stores. The first credit card however, was developed in 1946 by John Biggins. Using this card, customers could make purchases at their local retail stores, and the owners of the stores would then deposit the charges at Biggins’ bank, who then collected payments from the customers over a period of time after the bank reimbursed the merchant. This card was known as “Charg-It”.

In 1951, the system grew and began to resemble the process of using today’s credit cards. The Franklin National Bank in Long Island issued credit cards to customers that could be used at any affiliated store. The customer would present the card to the merchant, and the merchant would call the bank to approve the transaction. Once the transaction was approved, the customer would leave with the goods, and the funds would be transferred to the merchant’s account minus a discount rate, which was the bank’s fee for managing the transaction.

The first American Express card was issued in 1958, and by 1959, other merchant account institutions began credit programs. In 1960, the concept of a bankcard association came into effect, with the Bank of America allowing other banks to issue their credit cards and process transactions. The Bank of America credit card was known as BankAmericard.

Proving successful, this initiative naturally drew in competition, and 14 banks met in Buffalo, NY to create the ICA, or the Interbank Credit Association in 1966. The ICA was set up to exchange credit card transaction information, and the main difference between it and Bank of America’s consortium was that all members were more or less equal.

It was at this point that an association consisting of four California banks, known as MasterCharge, opened their doors to other financial institutions. The name MasterCharge was licensed to be used by the ICA, which took both the name and the logo. In that same year, the ICA began what would become a gigantic global network by forming an alliance with the Banco Nacional in Mexico, Eurocard of Europe, and members of the Japanese banking industry.

As a response, BankAmericard formed its own association with the banks that were already licensed to carry its cards. This association was known as National BankAmericard.

In 1973, both associations introduced an electronic payment system, transitioning from the cumbersome paper-based systems that came with huge overheads. First, in 1973, the authorization system was revamped, and then in 1974, the electronic clearing and settlement systems were upgraded.

The rivalry between these two associations goes on to this day, and you might know them by their new names. In 1976, National BankAmericard became Visa USA, and MasterCharge became MasterCard International.

For more information on the history of credit card processing, or to sign up for a merchant account, please call (888) 924-2743 or go to

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