Credit cards have become such a common form of payment, that in a certain sense, we take for granted the convenience they offer us. That convenience, however, also leads to trouble for some of us who have difficulties controlling our spending. Credit card debt is subject to interest, so it’s in a cardholder’s best interest to make payments quickly on a credit card.
But when used responsibly, they are a very useful payment tool. Credit cards allow cardholders to have a revolving account and line of credit, from which the holder can borrow money for payments or as a cash advance. There is a lot more that goes into a credit card beyond just swiping it at a terminal for your purchases, though. There are a number of securities, details and features behind your credit card, including a unique history. Here are some interesting things you might not have known about your credit card.
1. The numbers on your credit card are a secret message
No, it will not tell you what really happened on the grassy knoll. Sorry. But you can figure out the card issuer and the country of origin of a credit card based on the number on the front of the card. The first six digits of your card is the “issuer identification number (IIN),” and there is then a variable length string (up to 12 digits) that refer to your individual account.
Take out your wallet and look at one of your credit cards. These issuers will always start their credit cards with these digits.
American Express: 34, 37
Discover Card: 65, 6011, 622126 through 622925, 644 through 649,
MasterCard: 51 through 55, 2221 through 2720
2. Your credit card number uses the Luhn algorithm
The what? The Luhn algorithm, or “modulus 10” algorithm, is a simple checksum formula used to validate the identity of your credit card.
The formula goes as this:
- Starting from the second-to-last digit, and moving left, double that number and every other digit. If the product of the doubling results in number greater than 9 (e.g. 8 x 2 = 16), then sum the digits of the products instead (e.g. 16 à 1+6 = 7)
- Sum the final values of all of your credit card digits. Both the ones you have doubled (or doubled and then summed) and the ones you have not doubled.
- The value should be evenly divisible by 10
If that goes a bit over your head, it uses magic. This is actually not a security measure, but instead used to protect against numerical typos.
3. There’s a magnet on your credit card
The colored stripe (usually black) on the back of your credit card is actually a magnetic strip, similar to ones found on old cassette tapes. The stripe consists of magnetically modified iron-based particles, which are actually tiny bars of magnets, each about 20 millionths of an inch thick, held in a plastic-like film. The modified variations of the magnetic poles represent the stored coded data on your card, which can then be read and interpreted at sales terminals.
4. Stripes are soooo 1990s
The magnetic stripe technology still being used in the U.S. is very outdated and will eventually be replaced by the newer EMV technology, or the credit card chip you may be seeing on your newer cards. Because the data on the stripes cannot change once imprinted, a thief just needs to steal the information once to keep making purchases. The newer EMV chips create a new set of data that cannot be used twice for every purchase you make.
To read more facts about how EMV credit card works check out our article 15 Things to Know About Your New EMV Credit Card Chip.
5. Credit cards follow an international standardized size
The ISO/IEC 7810 sets the internationally accepted standards for identification cards, including physical characteristics. These characteristics include size, bending stiffness, and resistance to flame, chemicals, temperature and humidity, light deterioration and material toxicity.
All card sizes have a thickness of 0.76 mm (0.030 in). Credit cards and most banking and ID cards belong in the ID-1 format, which measure 85.60 x 53.98 mm (3.370 x 2.125 in) and have rounded corners with a radius of 2.88-3.48 mm. Feel free to impress people with this knowledge during dinner conversation.
6. Credit cards started in literature
The concept of using a card for purchases can be confirmed to go back as far as 1887 when it was mentioned it Edward Bellamy’s utopian novel, Looking Backward. Bellamy uses the term credit card eleven times in his novel. His version of the credit card is slightly different from the modern day credit card, as the card was used to spend a citizen’s dividend granted by the government instead of borrowing from a lender or banking institution.
7. The first “universal credit card” was introduced in 1950
The first “universal credit card” was introduced by the Diner’s Club, Inc., in 1950 and could be used at a number of different establishments for general purposes. Technically this was still not a credit card, as so much a charge card. Cardholders would be able to be charge their payments to their card, and pay their bill in full at the end of the month.
Other charge cards and concepts existed prior to The Diners’ Club Card including charge coins, the Charga-Plate, and the Air Travel Card, but these were all used for specific stores, hotels, services, or industries, not for general purposes among a wide acceptance network.
8. Bank of America launched the first national credit card plan
No one had been able to create a successful revolving credit financial system until 1958. Multiple small banks attempted, but none were able to last long as they were unable to create a large enough network of merchants willing to accept a card from a third-party bank. Consumers continued using merchant-issued revolving cards that were limited to only a few merchants.
However, In September of 1958, after studying previous failures and successes of other smaller scale revolving credit systems, Bank of America launched the BankAmericard in Fresno, California as a test market. The reason Fresno was chosen was due to its population size (250,000 being big enough to work in scale, but small enough control startup costs), the bank having 45 percent market share of its residents, and the city’s relative isolation, so public relations could be controlled should the project fail.
Bank of America launched the card by mass mailing 60,000 Fresno residents all at once their new card. This finally broke the cycle of merchants unwilling to accept cards that were only used by few consumers, and finally convinced consumers to use the card because more merchants were willing to accept them.
9. But… The first national credit card was almost a catastrophic failure
The initial 1958 test of the BankAmericard in Fresno went smoothly. But, after confirming rumors that another bank was about to initiate its own credit card launch in San Francisco, Bank of America’s home market, Bank of America decided to rush the program and initiate drops in San Francisco, Sacramento, and Los Angeles in 1959. By October of that year, over 2 million credit cards were given away statewide, and the BankAmericard was being accepted by 20,000 merchants.
But, after launch, 22 percent of credit card accounts were delinquent, not the 4 percent expected. The program also created a new type of crime, credit card fraud. And, the original designed cardholder agreement did not protect customers from fraud, who were held liable for all charges. Ultimately, Bank of America lost $20 million on the launch of the BankAmericard when also including the costs of overhead and advertising.
Other management decided to take over the program after the catastrophe believing the card could still be salvaged. With a massive effort of public outreach and implementing proper financial controls, Bank of America was able to save the program.
The BankAmericard was eventually licensed to other banking groups outside of California, starting in 1966 as a new competitor, Master Charge (now MasterCard), created their own card to compete. Today, the BankAmericard is now known by a much better known name: Visa.
10. Sears created the Discover Card®
In the 1980s, Sears, Roebuck and Co, wasn’t just the largest retailer in America, but also a diversified company spread across multiple industries, including financial services. In 1981, Sears purchased the Dean Witter brokerage firm. Through their Dean Witter acquisition, they conceptualized the Sears credit card in 1985. The Sears credit card, which would be launched as the new Discover Card®, debuted during a 1986 Super Bowl commercial.
The Discover card was unique to the credit card industry of the time and created some firsts.
- It had no annual fees, which was a new concept
- The card gave holders cash back rewards, which was also a brand new concept
- Discover credit limits were comparatively higher than Visa or MasterCards