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The History of Credit Cards, Part 1: How Did People Pay Before Credit Cards?

It might be difficult for consumers, and especially for those involved in sophisticated credit card processing systems, to understand how business got done before credit cards became a pervasive part of life. Of course, this pre-credit card period in history occurred before the internet. Nobody had to worry about safe online payments because ecommerce did not yet exist.

Even now, older generations will probably remember paying for a lot more goods and services with cash and checks in the past, but the concept of credit cards has actually been around for a long time. Certainly, the idea of credit existed for centuries, but it was more associated with specific merchants, unusually large purchases or businesses.

A Short Prehistory of Credit Cards

According to Credit Cards and Payment Efficiency, written for the Federal Reserve, almost all consumer and business purchases were paid with cash and checks during the early to middle part of the 20th century. Some of the first developments that paved the way towards modern credit cards include:

  • Proprietary store charge cards: Early 20th century
  • Gasoline cards: The 1920s
  • Entertainment and travel cards: The 1950s
  • Early bank cards: Late 1940s to 1950s

Proprietary Charge Cards

By the early 1900s, and even the late 1800s, some stores might issue charge cards, coins or tokens for customers to use only in that specific business. These were mostly processed manually, and debt was tracked in a paper ledger. Some larger stores did have a sort of press machine that made an imprint of a charge plate or token, but this still did not really qualify as automated processing.

The first proprietary store cards in the early 20th century did not represent revolving credit as debts were due at the end of the billing month. In fact, some stores hired companies that collected overdue debts by parking in front of customer’s doors with trucks or wagons that had very striking painting on the side, clearly marking them as debt collectors. Since neighbors could see these trucks, embarrassment seemed to be the primary method of enforcing timely payments.

ABTK-small-blog-image-history-01Service Station Gasoline Cards

In the early 1920s, oil companies issued paper courtesy cards to vehicle owners to encourage brand loyalty; this may have been the origin of consumer revolving credit. These were usually limited to a specific brand and even to a specific geographic area, so they couldn’t be used for traveling.

Travel and Entertainment Cards

By the 1950s, more general travel and entertainment cards appeared. Diners Club introduced their card in 1950, and it was the first time that consumers could really use their credit card outside of their own local area, and with any merchant who accepted the cards. American Express issued a similar travel and entertainment card called the “Green Card” in 1958. The bills still came due at the end of the payment period, so these did not represent true revolving credit.

ABTK-small-blog-image-history-02These were also handled very differently than the merchant services that businesses rely upon today. For one thing, it was a “closed loop” system where only the card issuer settled accounts with both consumers and merchants. Also, electronic POS systems did not exist, so all transactions got documented with paper forms and copies that had to be sent to the credit card company for processing. Security was still an issue because these paper forms could get lost, forged or have totals changed during processing.

Early Bank Cards

In the latter part of the 1940s to the 1950s, some banks began issuing their own cards. Typically, cardholders had to have an account with the bank. Also, merchants had to sign up with each individual bank in order to accept the cards, and these were also usually only accepted within the limited geographic region that the bank served.

The Future of Credit Card Processing and Mobile Merchant Accounts

At Abtek, we have worked on the cutting edge of worldwide credit card processing technology since 1986. If you value security, integration and reliability, partner with us as your credit card processing solution of the future. We combine the latest in technology with old-fashioned customer service to deliver value for our merchant partners.

Read more in this series:
The History of Credit Cards, Part 2: Processing Before eCommerce

The History of Credit Cards, Part 3: The Evolution of True Digital Credit Card Systems

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How to Choose the Best Merchant Services Provider for Your Business

Without having the ability to accept credit card payments and other payment options, even the best retailers can’t expect to stay in business for very long. These days, consumers have more payment options at their disposal than ever, and they expect to be able to use any of them when making purchases online and in brick-and-mortar stores.

At Abtek, we understand how confusing it can be to find a company that provides affordable, secure, effective credit card processing options and other essential services for merchants. From accepting online payments to being able to reverse chargebacks quickly and easily, there are lots of things to take into consideration.

Seven Things to Consider When Shopping for Merchant Services

  1. ABTK-small-blog-image-01Pricing. Yes, pricing is important. No one wants to pay more than they should for their ecommerce and merchant account needs. Still, pricing shouldn’t be your one-and-only motivator when looking for a provider. POS systems providers often lure people in by advertising rock-bottom rates. All too often, though, the rates aren’t all-inclusive, and you end up getting nickel-and-dimed in the long run. Furthermore, it’s far better to pay a little more for processing that’s truly effective, reliable and secure than it is to save a few bucks and end up with something that falls far short of delivering the quality you need and deserve.
  2. Flexibility. If you’ve ever dealt with credit card processing companies before, you already know how important this factor is. Many providers are only set up to deal with small businesses, for instance. If your needs change, evolve and grow – which they will, with any luck – the last thing you’ll want is to have to find a new provider. In other words, the provider you choose should offer flexible, scalable solutions. You may not be interested in mobile merchant accounts now because you do the majority of your business in your store. What if that changes, though? Having to switch is a major burden, so choose a provider that offers flexible, open-ended solutions.
  3. Transparency. This tends to be a major issue in the industry. As mentioned previously, it’s not unusual for providers to advertise seemingly low prices only to turn around and charge all kinds of extra fees later. You shouldn’t be in the dark about a provider’s prices or capabilities, and you should know exactly what to expect when it comes to things like fees, conditions and rates.
  4. ABTK-small-blog-image-02All-In-One Solutions. Don’t let anyone tell you that you’re going to have to use different providers for different needs. There are plenty of all-in-one providers out there. Finding a single provider for everything from virtual terminals to credit card storage is perfectly doable, and it’s much more convenient to have everything delivered by a single company. Even if a provider is only lacking one service you need, you should cross it off your list and move on.
  5. ABTK-small-blog-image-03Security. Nothing can ruin a company’s reputation like a security breach. Whether you’re mostly interested in POS systems or in online payment processing, the provider you choose should make security a top priority at every level. Don’t settle for a generic promise about security, either. Dig deeply, and ask for details. How exactly will your online payments and other services be kept safe and secure? What measures does the provider take to keep your information and your customers’ information out of the wrong hands? There should be no doubt in your mind that the provider takes security seriously.
  6. Reputation. In this day and age, there’s no excuse for not fully vetting a company that provides merchant services. Your first stop should be the Better Business Bureau website. Find out what the provider’s rating with the BBB is and whether any complaints have been filed in the recent past. Perform an online search to look for reviews from everyday business owners regarding the company in question. What does the general consensus seem to be?
  7. Specialization. Finally, pay attention to the kinds of companies that the provider has helped in the past. Ideally, choose a provider that has a proven track record for helping other companies in your industry.

As eager as you may be to find a great merchant services provider, don’t rush the process. It’s far better to take your time and make the right choice now than to backtrack and have to find yourself back at the drawing board. With these tips in mind, zeroing in on the right provider should be fairly easy.

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