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The modern credit card era began in February 1950 with the launch of the Diners Club card, widely recognized as the first multipurpose charge card accepted by multiple, unaffiliated merchants. The origin story is now legendary:
Frank McNamara, a New York businessman, found himself unable to pay for a restaurant meal because he had forgotten his wallet. Inspired by this embarrassment, McNamara, along with his lawyer Ralph Schneider and later partners Matty Simmons and Alfred S. Bloomingdale, conceived a card that could be used at various restaurants, allowing patrons to pay their bills monthly through a central intermediary.
On Feb. 8, 1950, McNamara returned to Major’s Cabin Grill in Manhattan and paid for his meal with a cardboard Diners Club card, marking what the company later called “The First Supper”. The card was initially accepted at 27 New York restaurants and issued to about 200 friends and acquaintances. By the end of its first year, Diners Club had 20,000 members and was accepted at 28 restaurants and two hotels; by 1951, membership had grown to 42,000, and acceptance had expanded to major U.S. cities.
The Diners Club model was innovative in several ways:
• Multipurpose Acceptance: Unlike store cards, it could be used at multiple, unaffiliated merchants.
• Centralized Billing: Diners Club paid the merchant and billed the cardholder monthly, requiring payment in full (a “charge card” model).
• Merchant Fees: Merchants paid a commission (initially 7%) on each transaction, a precursor to modern interchange fees.
•Annual Fees: Cardholders paid an annual membership fee (initially $5).
The card quickly became a status symbol among business travelers and professionals, and its success demonstrated the viability of a third-party credit intermediary.
Diners Club’s rapid growth inspired competitors and imitators. In 1958, American Express, already a major player in travelers’ checks and money orders, launched its own charge card, initially made of purple paperboard and later plastic. American Express targeted affluent travelers and quickly signed up 250,000 cardholders and 17,500 merchants at launch. Like Diners Club, the American Express card required payment in full each month and charged both annual fees and merchant commissions.
Continued next week….
Everything else is just history
