What Did People Do Before Credit Cards?

It’s pretty safe to say that consumers in the United States have a lot of credit cards. Here are some quick facts:

• In 2018, there were about 1.1. trillion credit cards in the U.S. 

• In 2019, there were more than 300 million Visa cards alone. 

• In the third quarter of 2020, the average person had 3.84 credit cards.

These plastic spending devices are such a part of daily life in the United States that it may be hard to imagine life before they existed. In reality, they’re really only about 70 years old, which raises the question: What did people do before credit cards existed?

The short answer is that, in most cases, consumers actually saved up the funds needed to make a purchase and then paid for it with cash or a check, or they could have bartered. And if they couldn’t do either of those, they most likely did without. 

So, how exactly did the concept of credit cards come about? Let’s look at their history and then see how bartering and another old-fashioned money-saving activity are making comebacks.

Credit card history 

How long have credit cards been around?

In the early part of the 20th century, stores like Macy’s and Wanamaker’s would reward their best customers with tokens that could be used to select an item and not pay for it at the time. Instead, the customers would have until the end of the month to make the payment. 

Through this offering, it became clear that wealthier customers liked a process where they didn’t need to use cash at the point of a financial transaction. 

By 1929, a third of sales at retail stores were being financed; when a store offered a financing plan, about half of their total sales were made through a payment plan. This system was somewhat different from today’s Visas and Mastercards, because the retail establishment directly carried the debt and took the risk.

The first true credit card was issued in 1950 in New York City: the Diners Club Card. Within a year, there were 10,000 members who had received a cardboard card that they could use at 28 different restaurants and two hotels. Members needed to pay off the balance each month. 

The following year, Franklin National Bank issued a card that people could use more broadly and the balance could be carried over with interest charged. Merchants who participated needed to pay a per-transaction fee.

In 1958, BankAmericard — which became Visa in 1976 — mailed out 60,000 revolving credit cards to people living in California. Other banks quickly created their own versions. 

In 1959, American Express created the first plastic card. MasterCard was created in 1966 — for the first few years, it was called the Interbank Card Association. 

In 1969, the magnetic stripe, invented by IBM and used for data storage, became a U.S. standard for credit cards. 

When did credit cards become popular?

There was a boom of credit cards in the 1970s. This is also when legislation was starting to be passed to manage the growing number of consumer complaints. The Fair Credit Reporting Act and the Fair Credit Billing Act are just two of the important pieces of legislation that were passed.

Money-saving methods from before credit cards

While credit cards are still popular, there are a couple ways people seem to have reverted to pre-credit card times. During the coronavirus pandemic, there was a resurgence of bartering and gardening. 

Bartering

Bartering groups have proliferated on social media since the beginning of the pandemic. Whether to trade for hard-to-find ingredients due to shortages, save money or be more environmentally friendly, people have been turning to bartering in these difficult times.

If one person needs toilet paper but has lots of flour, and someone else is in the opposite situation, it can make good sense to simply make a swap. Neither party needs to dip into their cash, yet they both get what they want and need. In some of the barter groups online, people are also bartering services.

While many people barter for practical reasons, they often find additional benefits. One woman in this Guardian article, noted how swapping used items eliminates unnecessary packaging, plastic and other waste. Another barterer traded kitchen items and clothing in return for prepared meals while she was recovering from COVID. This shows the flexibility of bartering; as long as it works for both parties, then it works.

Gardening

An activity that the whole family can do together while spending time outside and producing actual fruits of their labor, home gardening is experiencing an unsurprising boost during the pandemic. People have also been able to ease some concerns they might have had over food shortages during lockdowns. 

As a result, fruit and vegetable seed sales have grown. W. Atlee Burpee & Co sold more seed in March 2020 than at any other time in the company’s 144-year history. Meanwhile, the Territorial Seed Company needed to take a break from accepting orders because of the overwhelming demand, and Johnny’s Selected Seeds witnessed a 270% increase in business when the U.S. went into national emergency status because of COVID.

A survey by Trees.com shows that 64% of Americans aged 18 and up started a plant-keeping hobby, inside or outside, during the coronavirus pandemic. Besides giving people an activity they could pursue while at home, many say it has helped them with their health, both mental and physical. 

An overwhelming percentage of people who began to garden and keep plants during the pandemic say they’ll continue to do so. 

If you’re gardening and growing more of your own food, this could help reduce grocery bills and put less of a burden on credit card balance — same with bartering. Sometimes credit card balances can increase to the point where it’s challenging to get them under control. 

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