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The First Credit Card Ever

Published: April 4, 2016

Today there are more than 2 billion credit cards being used around the world. On February 9, 1950, there were three.

That afternoon, Frank McNamara, who conceived the idea of a credit card to be honored by restaurants, carried Diners Club card number 1000. His partner Ralph Schneider had 1001, and I, at the time their publicity man and very soon to be in charge of all sales and marketing, had 1002.

Card 1000 was first used when the three of us had lunch that day. The restaurant was Major’s Cabin Grill, which was adjacent to the Empire State Building where Schneider and McNamara had their offices. McNamara ran a small loan company, and Schneider, a Harvard Law School graduate, practiced law from that office. Major’s Cabin Grill no longer exists, but my memory of that day is vivid. The owners of the restaurant, Major Satz and his son, Buddy, stood some 20 feet from us watching after we finished lunch. McNamara pulled out his wallet and handed the first credit card ever printed to the waiter, who was puzzled but then suddenly remembered. He turned to the major, who nodded. The waiter walked off and came back with a triplicate sheet, which had a rectangular box with the price of the lunch and a space for a tip. There were two carbon sheets between three pages, so that when McNamara signed for lunch, the signature would appear on all three sheets. As though he had rehearsed for this — which he had — the waiter pulled out sheet number three and handed it to McNamara. The top copy was to be sent to the Diners Club, and the middle copy was kept by the restaurant. McNamara turned to Schneider and me and smiled.

Schneider

Schneider

McNamara

McNamara

I first met with McNamara and Schneider a few months earlier, when they had outlined their plan. McNamara had a “great idea” that involved owing money on dining charges — hence the name Diners Club. But it wasn’t being well received. Restaurant owners didn’t know who McNamara was. Since I was a press agent for many leading restaurants and nightclubs, I had been recommended as someone who could help.

The scheme was simple: McNamara and Schneider would issue charge cards to be used at New York–area establishments. Every month, they’d bill the user of the card for his charges during the previous 30 days. The cardholders would be charged nothing, the restaurant would receive 93 percent of the total, and Diners Club would get the rest.

The idea didn’t sound very good to me. I’d never charged for anything in my life; I paid cash for everything. I said I’d think about representing them, left the office, and simply forgot about it. But Schneider was insistent. We met for a drink and he went over all the good points of McNamara’s idea: You don’t have to carry a lot of cash. You get a receipt for your own bookkeeping. And perhaps most importantly, you have a receipt for a tax write-off if you take out a potential customer or client.

Interview with author Matty Simmons


I agreed to take on the account and proceeded to convince several of my clients to honor the cards. Fourteen restaurants were listed on the back of the credit card. The Diners Club was in business.

Now it was up to me to get cardholders. I pitched the project to Richard Wadell, an editor for Business Week, which was an ideal place to introduce Diners Club, with its appeal to businessmen. Within a few weeks of publication, there were more than 8,000 Diners Club cardholders. By the end of the year, membership was near 100,000. The idea was clearly a success, but the company was losing money. “You’ve got to charge for the card,” I insisted. McNamara didn’t agree: “Nobody will pay for a credit card. More volume will make this work.” Schneider listened to both of us and then shrugged and said, “What have we got to lose? We don’t have the money to wait for more volume. If we don’t charge for the card now, we’re out of business.” I clinched the argument when I pointed out that “people who use the card will pay a couple of bucks a year for it, and the people who don’t will drop it.”

That’s exactly what happened. We charged $3 yearly for membership, and about half the users dropped out. But the other 50 percent paid the three bucks. The company was immediately profitable, and within three years we had nearly 500,000 cardholders, and the three of us gave up our other jobs to work fulltime on Diners Club.

The idea didn’t sound very good to me. I’d never charged for anything in my life; I paid cash for everything.

When, as the head of public relations, I was asked how McNamara had first come up with such an innovative concept, I made up a story that quickly became accepted as fact: McNamara, I said, had been caught short of cash one day after having lunch and recalled Edward Bellamy’s 1888 book Looking Backward, which predicted that sometime in the 20th century, cash would not be used but, instead, some kind of credit card.

Not a word of that story was true. McNamara never read the book. The idea came to him when he was sitting on a commuter train. But thanks to him, Bellamy’s prediction would, in fact, come true.

I started publishing a newsletter that was sent with the monthly bills. It became so popular that it was relaunched, first as Diners Club News, and then as The Diners Club Magazine, which included paid advertising.

Later, the name would be changed to Signature, with an additional $3 subscription fee added to what had become a $7 membership charge. Signature was the first magazine to carry mail-order ads that gave the purchaser the ease of simply filling in his credit card number with the order. This, of course, was the forerunner of today’s TV and radio mail-order advertising, a billion-dollar industry. Huge online businesses like Amazon have business models that are really based on our original Signature innovation: buy with your credit card.

But despite all the success, McNamara felt that the company had reached its full potential, and, in 1952, he wanted to sell his shares. Alfred Bloomingdale, the department store heir, and some associates had started a competitive company called Dine & Sign a year earlier, but it had floundered. Bloomingdale bought out McNamara for $500,000, a figure that would be a fraction of the eventual worth of the stock that he purchased, and merged the two companies.

The credit card craze didn’t take long to spread quickly beyond New York. Within a few years, it was all over the United States as well as Canada, Mexico, and England. But it was probably Al Bloomingdale who was responsible for making Diners Club an international icon.

Al was a great guy who had more friends than anybody I’d ever known. His next-door neighbor in L.A. was Buddy Adler, head of production at 20th Century Fox. Together, they cooked up an idea for a movie, The Man from the Diners’ Club, and Columbia Pictures made it with Danny Kaye starring.

Charlie Powell and Buddy Young were then the heads of marketing and publicity for Columbia. They came to me. “Well, you know the credit card business and you’re a marketing man,” they said. “How do we kick this picture off?” My brother Don, also a press agent, and I came up with the idea of taking a town somewhere near New York and for 24 hours putting it exclusively on credit cards. No cash for anything. It was to be a sign of the future. We issued credit cards to everybody in Winsted, Connecticut. I wrote the following article on March 12, 1963, that appeared on the front page of the local Winsted Evening Citizen:

CASH DIED TODAY!

This is an obituary. It’s about something that’s always been very near and dear to us. It’s about something people have too much of, others have barely enough of, and some, who love it fondly, seem to get rid of it as soon as they get it. Cash, which was born several thousand years ago, the son of Barter, the adopted child of Trade, died today in Winsted, Connecticut, a small American city on the banks of the Mad River.

The doctors who treated the patient before it died in Winsted came up with the following diagnosis: Why did cash die? It got dirty. It ripped. It faded, and people lost it and had no way to claim it if somebody else found it. When you had some of it, somebody was always trying to borrow some from you. When you used it, you had to stop and count it and examine it, and so did the person you gave it to. Sometimes it was too big for a cab ride and too small for dinner. It was easily gambled away and carried some ten-odd million germs per bill. It was absolutely irreplaceable when accidentally dropped into the family incinerator and was something you had to worry about having too much of when walking down a dark street and too little walking into an expensive store.

Cash will be missed. People got used to it, but cash was replaced in Winsted today and may eventually be replaced everywhere by something else people have become used to — the credit card.

The Diners Club, one of cash’s most powerful adversaries since it was born in 1950, was appropriately enough the chief pallbearer at cash’s funeral today. This day in Winsted saw 10,000 people do all their buying without cash. They used only a Diners Club card.

For those who will grieve for cash, we are delighted to be able to tell you that its death was painless. The exact time of that death was 12:01 AM March 13th, Winsted time. The time the modern world caught up with an elderly system that simply gave way to a simpler, more convenient, and efficient one.

The cash-free day went off perfectly. The people of Winsted used credit cards for all their purchases: groceries, taxis, clothing, everything. No problems — buy and sign. At the end of the day, Schneider shook my hand and said, “This is it. This is the future.”

The Winsted experience taught us that using the card for everything would work. We learned that people wanted to sign for everything and get one bill. The name Diners Club came to mean, simply, “Charge it!”

Today, 72 percent of American consumers hold and use at least one credit card.

Schneider, the steady, sensible man-in-charge, died in 1964. Al Bloomingdale, then the company’s biggest stockholder, became president and chairman of the board. I stayed, continuing as executive vice president in charge of sales, marketing, and publishing.

In the mid-’60s, Diners Club went through a period when several major companies gained control. In 1981, Citibank acquired the company. In 2008, they sold it to Discover, who made the deal because of the international presence of Diners Club, for $165 million.

I left the company in 1967. Signature was flourishing, but I wanted to concentrate on publishing only. With the sale of the company, I decided it was time to leave.

A year after I left, something new came to the industry: the computer. By 1968, the company was totally computerized, and everything went haywire — addresses got lost, statements were incorrect, and with the onslaught of Visa and MasterCard, Diners Club started to fade. It’s still in operation, and although its popularity is comparatively sparse in the United States, it’s sizeable in other countries where foreign operations were franchised and are run by domestic investors. The company currently reports it has 5 million cardholders worldwide.

According to recent surveys, Visa is the world’s biggest credit card system, with nearly 850 million cards in circulation. MasterCard trails it by about 83 million cards, and American Express has some 113 million members.

The last 65 years have seen the most numerous and amazing changes in the history of mankind. We’ve walked on the moon, and our cameras and rockets explore the universe. Many diseases have been conquered, and our lifespan has dramatically increased. And, of course, computers and the Internet have totally revolutionized our lives.

But the credit card — one of the most notable innovations, which touches almost everyone on the planet — has nothing to do with science or technology. It isn’t even very intricate. It’s just something that a guy who ran a small loan company thought up one day on a commuter train on his way home to Long Island.

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