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Chapter 8. CREDIT CARDS > Plastic Man

Plastic Man

Although it may seem like credit cards have been with us forever, it was not until 1950 that Diners Club issued the first credit card that was originally used at, not surprisingly, restaurants. The “Aha!” moment that spurred the creation of Diners Club occurred when Frank X. McNamara joined his lawyer Ralph Sneider and his friend Alfred Bloomingdale (yes, of those Bloomingdales) for dinner on an evening in 1949 at the Major's Cabin Grill, a New York City restaurant. When McNamara reached for his wallet to retrieve some cash to pay for the meal, he suddenly realized that he had neglected to bring his wallet. Oops! A telephone call to his wife remedied the situation and she brought him the necessary money. But, taking a bad situation and turning it into a good and profitable one, the incident inspired McNamara to come up with the idea of a credit card that could be used at many different places rather than just at one store, as was the custom of the time. McNamara brought his idea to the two friends with whom he had that insightful dinner and a new company was born—Diners Club. As McNamara envisioned it, Diners Club would be the facilitator for the providing of credit through businesses by offering credit to individuals on behalf of these businesses. Diners Club would then bill the individuals, collect the money, and pay the businesses. A business model was born, and the three men formed Diners Club. Interest was not charged, and payment in full was required each month. The source of the profit for Diners Club was the combination of a small annual fee to card holders beginning at $3 in 1951 and a 7 percent surcharge to the merchants subscribing to Diners Club on each purchase.

In keeping with the name, the first businesses that accepted Diners Club cards were 14 New York restaurants. And although we talk about credit cards as “plastic,” the first Diners Club card, as odd as it may seem today, was printed on paper. From an initial distribution of 200 Diners Club cards, membership soared to 20,000 in the first year. Within two years, the company had turned a profit, and the visionary Frank McNamara sold his interest in Diners Club to Sneider and Bloomingdale for $200,000 because he was convinced that credit cards were just a fad.


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