Charge Card - History

History

In 1914, Western Union opened the first charge account for its customers and provided them with a paper identification. There were many larger department stores which opened store charge accounts for their customers with paper identification, enabling the customer to make purchasers on credit provided by the store. However, these accounts could only be used within the store which issued them. In 1950, Diners Club began opening charge accounts with paper identification cards, directed at the travel and entertainment markets. The novel feature of these cards was that the charge card could be used in a large number of stores. These stores had to enter an agreement with Diners Club, and pay a fee to the company. For the fee, Diners Club carried the cost of setting up accounts, authorizing each transaction, processing transactions and collections, bore the financing costs and assumed the risk of cardholders defaulting. The new system was especially appealing to smaller stores in competition with the larger stores but who could not justify setting up their own charge account facilities. Eventually the larger stores began accepting these cards, testifying that the fees charged by the card operator were lower than the store's cost in running their own store accounts. In 1957, American Express also entered the field, and in 1959 was the first company to issue embossed plastic charge cards to ISO/IEC 7810 standards.

In Europe, the MasterCard-affiliated Maestro brand (which is a debit card rather than a charge card) replaced the European Eurocheque brand for payment cards in 2002. Many Eurocheque cards, particularly in such countries as Austria and Germany, were charge cards branded with the Eurocheque logo. In addition, the European Eurocard, issued as the competitor for American Express was, and in some countries (such as the Nordic countries) still is, a charge card. Therefore, the majority of MasterCards in these countries still are charge cards. Visa charge cards are also available in Europe.