Credit report

Staff Writer
Columbus Alive

If you needed money in the 1800s, you could pick your poison: pawnbroker, friend, family member, illegal small loan lender or mortgage lender. By 1858, consumer debt measured as high as $1.5 billion in the U.S., and it rose to $11 trillion just 32 years later.

At first, credit cards were really just substitute markers for payment. Rather than deal with looking up account numbers for each transaction, stores started issuing credit cards or tokens instead. After getting the bill, the customer had to pay or would likely lose credit with the store.

John Biggins of the Flatbush National Bank of Brooklyn invented the first actual bank credit cards in 1946. Through his "Charge-It" program, merchants could deposit their sales slips in the bank and the bank would bill the customer.

Another key moment in the development of credit cards started with Frank McNamara, a New York businessman who faced embarrassment when he realized he'd forgotten his cash while entertaining a client at Major's Cabin Grill.

His wife covered the bill, but McNamara didn't forget the event. A few weeks later, he discussed an idea for a diner's club with his lawyer, Frank Schneider. Using the Diner's Club card, people could eat in a variety of restaurants and pay their tabs at the end of the month.

The card became so popular that other financial organizations mimicked the idea. Franklin National Bank issued the first revolving charge card in 1951, allowing customers to borrow and repay money without approval as long as they stayed under their credit limit - and didn't mind accruing interest charges.

Bank of America (which became Visa) and MasterCard took the idea one huge step further in 1967, creating Interchange, a system that allowed banks to settle credit transactions throughout the U.S., rather than just locally.

Adapted from In the Beginning (HarperCollins), which is available at leading bookstores. For a daily dose of quirky fun, visit MentalFloss.com and check out mental_floss magazine at your local newsstand.

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