Credit cards, commonly known as "overdraft cards", mean that users do not need to deposit money first, but can enjoy advanced consumption by using the effective credit limit in the card to consume first and repay later. This will allow those "moonlight tribes" to continue consuming and increase their spending power. There is such a joke, two men walked out of the bar, one of them muttered: Without it, it is impossible to live; with it, life is not easy! Another man felt the same way and echoed: Yes, that's what women are like. The first person laughed: I'm talking about credit cards. The emergence of credit cards has completely changed people's consumption concepts and lifestyles.
Confucius, more than 2,000 years ago, once said, "If the people have no faith, they will not be established." The concept of "credit" has a long history in China. In China's private commodity transactions, "credit" and other methods often appear. "It is easy to borrow and repay, and it is not difficult to borrow again" is an example. In ancient times, consumer credit took the form of usury. Because usury can easily cause social conflicts and conflicts, it has been banned by the government in some places. Beginning in the 19th century, Western consumer credit developed rapidly. After 1850, manufacturers began to sell expensive high-end goods through installment payments.
In the mid-19th century, a man named Morris invented a credit chip similar to a metal badge to flaunt the consumption concept of "enjoy now, pay later". This was the earliest credit card. Early credit cards were issued by retailers, department stores, oil companies, and airlines. They were issued to corporate sales targets, including customers with frequent business contacts and customers with business development potential. Credit cards can not only prove the identity of customers, but are also a way to attract and stabilize customers and increase turnover. The income of this kind of card is far better than expected, and it is gradually being used by more and more industries. However, this kind of card has its obvious limitations. It can only be consumed in one store and cannot be used universally.
As for the prototype of modern credit cards, it is generally accepted that the "diners club" appeared in 1951. It is said that one day, American businessman Fran McNamara ate at a restaurant in New York and found that he had no cash when he paid. Tongda's boss came to the rescue and said, "I know your credit has always been very good. Let's pay together next time." This embarrassing dining experience gave McNamara the idea of ??creating a credit card. In the spring of 1950, McNamara cooperated with his friend Snyder and invested US$10,000 to establish the "Diners·Club" in New York. The world's first credit card institution was born.
According to the idea of ??McNamara and his friend Snyder, they can create a third party that provides payment services between merchants and customers. They hope to collect some fees from merchants to achieve profitability for card issuers, rather than charging fees from consumers and increasing the burden on consumers. They asked some restaurant owners whether they could support this approach, and only one owner expressed support, while most stores did not approve of this new consumption model. Although there were few supporters, McNamara and Snyder continued to explore and try. The two first targeted the catering industry in Manhattan. After repeated difficult negotiations with restaurateurs, they finally convinced a group of restaurants to accept this model.
The hard work paid off, and finally some merchants were willing to try using their credit cards. The earliest customers were a group of sales managers, who quickly accepted this credit method. Because this allows them to easily understand the entertainment expenses of their salesmen and control sales costs. After opening up in the catering industry, Diners Club quickly spread to other areas such as tourism. By 1951, the number of Diners Club members had exceeded 40,000, and there were merchants accepting Diners Club cards in many major cities in the United States. The model of Diners Club first advancing money for cardholders and charging merchants a handling fee is still used today.
To sum up, the operation and profit model of Diners Club is: (1) Diners Club signs contracts with different merchants to ensure that the credit cards issued by Diners Club are allowed to be used. A certain percentage (7%) charges merchant handling fees; (2) Diners Club issues credit cards to consumers for consumers to purchase goods and services, and Diners Club charges cardholders an annual fee ($18); (3) Diners Club Diners Club borrows money from commercial banks to pay consumers' credit purchases to contracted merchants. After the cardholders repay the amount of credit purchases, Diners Club will return this part of the funds to the bank.
Less than a year after its launch, Diners Club processed US$3 million in transactions and made a profit of US$60,000 in March 1951 alone. By 1956, Diners Club's annual transaction volume exceeded US$290 million, with profits of US$40 million.
In 1958, American Express introduced the Express card. Unlike Diners Club, American Express is a century-old store in the United States. It started in the express delivery business in 1850 and became a well-known large company after World War II. Its most profitable business at that time was travellers' checks that were circulated around the world. At that time, many banks had launched bank cards, and in the tourism industry that American Express was good at In this field, Diners Club is also actively expanding the market. Under this situation, American Express had long planned to launch bank card business, but it hesitated because it was worried that it would affect its traveler's check business.
It is said that when he heard that Diners Club was planning to set up an international travel service network like American Express and issue traveler's checks, in order to prevent it from cannibalizing his own business, the president of American Express finally made a decision Determined to start a credit card business. Regardless of how the initial decision was reached, American Express quickly established itself in the business, relying on its reputation and broad customer base. When the American Express card was issued, more than 17,000 merchants signed up to join the network. Since then, with the addition of 150,000 cardholders and 4,500 member hotels of the American Hotel Alliance, American Express cards have gradually been accepted by the mainstream business community in the United States.
Also in 1958, even before American Express, Bank of America launched their first credit card. But instead of conducting a large-scale publicity, Bank of America conducted a market test in Fresno, a medium-sized city in California. Bank of America mailed a total of 60,000 Bank of America credit cards to nearly every household in Fresno. Unlike in the past when only a few wealthy people had access to credit cards, ordinary families in Fresno also had access to the cards and had thousands of dollars at their disposal overnight. In the second year of testing, people spent $59 million on America's credit cards, equivalent to $350 million today.
Unlike Diners Club, Bank of America's credit card adds a credit rollover feature. Consumers who hold an Americas credit card can not only pay their bills just like using a Diners Club card, but they don't have to pay off the entire balance when they receive their bill at the end of the month. As a result, the unpaid balance on the card will automatically be rolled over to the next month. The bank charges interest on this balance, and the credit card has an additional way to make money. In fact, Bank of America's credit card combines two products: If you pay off your balance every month, this card is the same as a Diners Club card, but compared to Diners Club cards, cardholders have one more choice, that is, whether to pay it off or not. Pay the entire amount due and let the balance start rolling over as credit. The emergence of the Bank of America credit card not only changed the composition of credit card users, but the "rolling credit" model it pioneered has remained as the core feature of credit cards to this day.