The Disastrous Story of the First Credit Cards


Back in 1958, Bank of America had a revolutionary idea: why not give customers a card with a revolving line of credit? Unlike existing cards, the BankAmericard wouldn’t require cardholders to pay off their balance in full each month. Instead, they could carry a debt with interest. The idea seemed genius: Customers would suddenly have access to instant loans, and the bank would turn a profit on interest and merchant fees. What could possibly go wrong?

As it turns out, everything. The product rollout was a catastrophe of epic proportions. Since no one had ever heard of this type of credit card, there was no real demand for it, but BofA was positive that once customers saw how convenient the card was, they’d be instant converts. So in September 1958, Bank of America put 60,000 unsolicited credit cards in the hands of Fresno, Calif., residents.

Credit Where It Wasn't Due

Unfortunately for BofA project manager Joe Williams, he was a little ahead of his time. The bank didn’t have a precise method of figuring out which customers were credit-worthy. And when the company tried to wing it, the results were disastrous. At one point, the bank’s Los Angeles branches made a list of customers who definitely should receive cards ... then bungled the paperwork and issued cards to all of the would-be deadbeats—who were quite happy to fulfill their end of the prophecy.

Worse still, BofA had naively assumed that cardholders would pay their bills; that’s what decent folks do when they owe someone money, right? Not so much. Twenty-two percent of payments were delinquent in the program’s early days, and the whole project was beset by fraud. Phantom charges started racking up from stolen cards and unscrupulous merchants.

Other problems bordered on the absurd. Clergy and the press blasted the company for fostering an “immoral” credit-based economy. At one point, thieves swiped a bunch of unembossed cards from the company’s warehouses then blackmailed BofA into buying them back.

Sweet Rewards

The BankAmericard lost $20 million in its first year on the market—over $150 million in today’s cash. Meanwhile, Williams was forced to resign just one year into the launch. In spite of all this, BofA stuck with the BankAmericard. As the company straightened out the card’s logistical kinks, it developed a wider network of merchants and banks. In 1976, the card changed its name to Visa. Williams emerged from the BankAmericard debacle in good shape, too. In 1962 he formed a company to buy Chase Manhattan Bank’s foundering credit card unit, which he spruced up and sold to American Express three years later.

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