Page 14 - Book1E

6
A Brief History
rather than the total cost of merchandise. Gradually, consumers began to shift from saving until they could pay cash to being more concerned about how much the monthly payments were. Sound familiar? Also during the post-World War II era, long-term home loans were intro- duced for veterans returning from the war. These loans were so success- ful, they soon became the standard of the home finance market, and a 30-year mortgage was considered the “norm.” In the past few years sub-prime lending, the practice of making loans to borrowers who do not qualify for the best interest rates because of a deficient credit his- tory, has become very controversial and has caused a credit crisis for sub-prime mortgage holders as well as lenders. Hundreds of thousands of borrowers have been forced to default on their homes while many sub-prime lenders have filed for bankruptcy.
Credit Cards
Credit cards as we know them were first introduced around 1950 with the inception of the Diner’s Club Card. As the story goes, Frank McNamara was out to dinner with friends. When it came time to pay the bill, McNamara realized he’d forgotten his wallet. This embarrass- ing situation sparked the idea to create a charge card that could be used for dining out and traveling. The idea caught on quickly at hundreds of restaurants and hotels.
By 1955, Western Airlines (now Delta Airlines) began accepting the card to pay for flights. Within 10 years, other airlines had joined in. The phenomenon of our modern credit card was born. The American Express Card was introduced in 1958, but it was Bank America that revolutionized the credit industry with the BankAmericard, which we now call Visa. This gave us the option of paying the balance in full at the end of each month or making a small payment and incurring an interest fee on the remaining balance. MasterCharge (now MasterCard) became BankAmericard’s competition in the 1960s.